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Partial Equilibria with Convex Capital Requirements: Existence, Uniqueness and Stability

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Author Info
Michail Anthropelos
Gordan Zitkovic
Abstract

In an incomplete semimartingale model of a financial market, we consider several risk-averse financial agents who negotiate the price of a bundle of contingent claims. Assuming that the agents' risk preferences are modelled by convex capital requirements, we define and analyze their demand functions and propose a notion of a partial equilibrium price. In addition to sufficient conditions for the existence and uniqueness, we also show that the equilibrium prices are stable with respect to misspecifications of agents' risk preferences.

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File URL: http://arxiv.org/abs/0901.3318
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File URL: http://arxiv.org/pdf/0901.3318
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Paper provided by arXiv.org in its series Quantitative Finance Papers with number 0901.3318.

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Date of creation: Jan 2009
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Handle: RePEc:arx:papers:0901.3318

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  1. Julien Hugonnier & Dmitry Kramkov, 2004. "Optimal investment with random endowments in incomplete markets," Quantitative Finance Papers math/0405293, arXiv.org. [Downloadable!]
  2. Mingxin Xu, 2006. "Risk measure pricing and hedging in incomplete markets," Annals of Finance, Springer, vol. 2(1), pages 51-71, January. [Downloadable!] (restricted)
    Other versions:
  3. Elyès Jouini & Clotilde Napp, 2004. "Convergence of utility functions and convergence of optimal strategies," Finance and Stochastics, Springer, vol. 8(1), pages 133-144, January. [Downloadable!] (restricted)
    Other versions:
  4. (**), Hui Wang & Jaksa Cvitanic & (*), Walter Schachermayer, 2001. "Utility maximization in incomplete markets with random endowment," Finance and Stochastics, Springer, vol. 5(2), pages 259-272. [Downloadable!] (restricted)
  5. Kasper Larsen & Gordan Zitkovic, 2007. "Stability of utility-maximization in incomplete markets," Quantitative Finance Papers 0706.0474, arXiv.org. [Downloadable!]
  6. Burgert, Christian & Rüschendorf, Ludger, 2008. "Allocation of risks and equilibrium in markets with finitely many traders," Insurance: Mathematics and Economics, Elsevier, vol. 42(1), pages 177-188, February. [Downloadable!] (restricted)
  7. Damir Filipović & Michael Kupper, 2008. "Optimal Capital And Risk Transfers For Group Diversification," Mathematical Finance, Blackwell Publishing, vol. 18(1), pages 55-76. [Downloadable!] (restricted)
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This page was last updated on 2009-12-22.

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