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exposita notes : Valuation in infinite-horizon sequential markets with portfolio constraints

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Author Info
Kevin X.D. Huang () (Department of Economics, Utah State University, 3530 Old Main Hill, Logan, UT 84322-3530, USA)

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Abstract

We develop a theory of valuation of assets in sequential markets over an infinite horizon and discuss implications of this theory for equilibrium under various portfolio constraints. We characterize a class of constraints under which sublinear valuation and a modified present value rule hold on the set of non-negative payoff streams in the absence of feasible arbitrage. We provide an example in which valuation is non-linear and the standard present value rule fails in incomplete markets. We show that linearity and countable additivity of valuation hold when markets are complete. We present a transversality constraint under which valuation is linear and countably additive on the set of all payoff streams regardless of whether markets are complete or incomplete.

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Publisher Info
Article provided by Springer in its journal Economic Theory.

Volume (Year): 20 (2002)
Issue (Month): 1 ()
Pages: 189-198
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Handle: RePEc:spr:joecth:v:20:y:2002:i:1:p:189-198

Note: Received: March 9, 2000; revised version: February 13, 2001
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Related research
Keywords: Valuation; Infinite horizon; Portfolio constraint.;

Find related papers by JEL classification:
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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This page was last updated on 2009-11-25.

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