IDEAS home Printed from https://ideas.repec.org/a/wsi/ijtafx/v11y2008i03ns0219024908004828.html
   My bibliography  Save this article

Equilibrium Prices For Monetary Utility Functions

Author

Listed:
  • DAMIR FILIPOVIĆ

    (Vienna Institute of Finance (Supported by WWTF (Vienna Science and Technology Fund)), University of Vienna and Vienna University of Economics and Business Administration, Heiligenstädter Strasse 46–48, A-1190 Vienna, Austria)

  • MICHAEL KUPPER

    (Vienna Institute of Finance (Supported by WWTF (Vienna Science and Technology Fund)), University of Vienna and Vienna University of Economics and Business Administration, Heiligenstädter Strasse 46–48, A-1190 Vienna, Austria)

Abstract

This paper provides sufficient and necessary conditions for the existence of equilibrium pricing rules for monetary utility functions under convex consumption constraints. These utility functions are characterized by the assumption of a fully fungible numeraire asset ("cash"). Each agent's utility is nominally shifted by exactly the amount of cash added to his endowment. We find the individual maximum utility that each agent is eligible for in an equilibrium and provide a game theoretic point of view for the fair allocation of the aggregate utility.

Suggested Citation

  • Damir Filipović & Michael Kupper, 2008. "Equilibrium Prices For Monetary Utility Functions," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(03), pages 325-343.
    • Handle: RePEc:wsi:ijtafx:v:11:y:2008:i:03:n:s0219024908004828
    DOI: 10.1142/S0219024908004828
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219024908004828
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219024908004828?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini & Marco Taboga, 2009. "Portfolio Selection With Monotone Mean‐Variance Preferences," Mathematical Finance, Wiley Blackwell, vol. 19(3), pages 487-521, July.
    2. repec:dau:papers:123456789/13604 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. José Valentim Machado Vicente & Jaqueline Terra Moura Marins, 2019. "A Volatility Smile-Based Uncertainty Index," Working Papers Series 502, Central Bank of Brazil, Research Department.
    2. He, Ying & Dyer, James S. & Butler, John C. & Jia, Jianmin, 2019. "An additive model of decision making under risk and ambiguity," Journal of Mathematical Economics, Elsevier, vol. 85(C), pages 78-92.
    3. Kozhan, Roman & Salmon, Mark, 2009. "Uncertainty aversion in a heterogeneous agent model of foreign exchange rate formation," Journal of Economic Dynamics and Control, Elsevier, vol. 33(5), pages 1106-1122, May.
    4. Sergio Ortobelli & Svetlozar Rachev & Haim Shalit & Frank Fabozzi, 2009. "Orderings and Probability Functionals Consistent with Preferences," Applied Mathematical Finance, Taylor & Francis Journals, vol. 16(1), pages 81-102.
    5. José Valentim Machado Vicente & Jaqueline Terra Moura Marins, 2021. "A volatility smile-based uncertainty index," Annals of Finance, Springer, vol. 17(2), pages 231-246, June.
    6. Patrick Cheridito & Tianhui Li, 2009. "Risk Measures On Orlicz Hearts," Mathematical Finance, Wiley Blackwell, vol. 19(2), pages 189-214, April.
    7. Xia Han & Liyuan Lin & Ruodu Wang, 2022. "Diversification quotients: Quantifying diversification via risk measures," Papers 2206.13679, arXiv.org, revised Mar 2024.
    8. Zhijun Zhao, 2011. "Preference Relativity, Ambiguity and Social Welfare Evaluation," Working Papers 352011, Hong Kong Institute for Monetary Research.
    9. Massimo Guidolin & Francesca Rinaldi, 2013. "Ambiguity in asset pricing and portfolio choice: a review of the literature," Theory and Decision, Springer, vol. 74(2), pages 183-217, February.
    10. Samuel Drapeau & Michael Kupper, 2013. "Risk Preferences and Their Robust Representation," Mathematics of Operations Research, INFORMS, vol. 38(1), pages 28-62, February.
    11. Jakub Trybu{l}a & Dariusz Zawisza, 2014. "Continuous time portfolio choice under monotone preferences with quadratic penalty - stochastic interest rate case," Papers 1404.5408, arXiv.org.
    12. Aleš Černý, 2020. "Semimartingale theory of monotone mean–variance portfolio allocation," Mathematical Finance, Wiley Blackwell, vol. 30(3), pages 1168-1178, July.
    13. Faro, José Heleno, 2015. "Variational Bewley preferences," Journal of Economic Theory, Elsevier, vol. 157(C), pages 699-729.
    14. Maccheroni, Fabio & Marinacci, Massimo & Rustichini, Aldo, 2006. "Dynamic variational preferences," Journal of Economic Theory, Elsevier, vol. 128(1), pages 4-44, May.
    15. Jakub Trybuła & Dariusz Zawisza, 2019. "Continuous-Time Portfolio Choice Under Monotone Mean-Variance Preferences—Stochastic Factor Case," Mathematics of Operations Research, INFORMS, vol. 44(3), pages 966-987, August.
    16. André, Eric, 2014. "Optimal portfolio with vector expected utility," Mathematical Social Sciences, Elsevier, vol. 69(C), pages 50-62.
    17. Fabio Maccheroni & Massimo Marinacci & Doriana Ruffino, 2013. "Alpha as Ambiguity: Robust Mean‐Variance Portfolio Analysis," Econometrica, Econometric Society, vol. 81(3), pages 1075-1113, May.
    18. Fabio Maccheroni & Massimo Marinacci & Aldo Rustichini, 2006. "Ambiguity Aversion, Robustness, and the Variational Representation of Preferences," Econometrica, Econometric Society, vol. 74(6), pages 1447-1498, November.
    19. Grechuk, Bogdan & Zabarankin, Michael, 2018. "Direct data-based decision making under uncertainty," European Journal of Operational Research, Elsevier, vol. 267(1), pages 200-211.
    20. Černý, Aleš & Maccheroni, Fabio & Marinacci, Massimo & Rustichini, Aldo, 2012. "On the computation of optimal monotone mean–variance portfolios via truncated quadratic utility," Journal of Mathematical Economics, Elsevier, vol. 48(6), pages 386-395.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:11:y:2008:i:03:n:s0219024908004828. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijtaf/ijtaf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.