The Comparative Statics of Equilibrium Derivative Prices
AbstractWe examine the conditions for preferences and risks that guarantee monotonicity of equilibrium derivative prices. In a Lucas economy with a derivative, we derive the equilibrium derivative price under expectation with respect to risk-neutral probability, and analyze comparative statics on the equilibrium derivative price based on the risk-neutral probability.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 04-19.
Length: 13 pages
Date of creation: Nov 2004
Date of revision:
Equilibrium Derivative Price; First-order Stochastic Dominance; Noise Risk; Risk-Neutral Probability.;
Find related papers by JEL classification:
- C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul L. McEntire, 1984. "Portfolio Theory for Independent Assets," Management Science, INFORMS, INFORMS, vol. 30(8), pages 952-963, August.
- Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, Econometric Society, vol. 46(6), pages 1429-45, November.
- Kihlstrom, Richard E & Romer, David & Williams, Steve, 1981. "Risk Aversion with Random Initial Wealth," Econometrica, Econometric Society, Econometric Society, vol. 49(4), pages 911-20, June.
- Harris Schlesinger & Christian Gollier, 2001.
"Changes in Risk and Asset Prices,"
CESifo Working Paper Series
443, CESifo Group Munich.
- Eeckhoudt, Louis & Gollier, Christian, 1995. "Demand for Risky Assets and the Monotone Probability Ratio Order," Journal of Risk and Uncertainty, Springer, Springer, vol. 11(2), pages 113-22, September.
- Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, Elsevier, vol. 2(3), pages 225-243, September.
- Nachman, David C., 1982. "Preservation of "more risk averse" under expectations," Journal of Economic Theory, Elsevier, Elsevier, vol. 28(2), pages 361-368, December.
- Paul R. Milgrom, 1981.
"Good News and Bad News: Representation Theorems and Applications,"
Bell Journal of Economics, The RAND Corporation,
The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
- Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Miles S. Kimball, 1991.
"Standard Risk Aversion,"
NBER Technical Working Papers
0099, National Bureau of Economic Research, Inc.
- Gollier Christian, 1995. "The Comparative Statics of Changes in Risk Revisited," Journal of Economic Theory, Elsevier, Elsevier, vol. 66(2), pages 522-535, August.
- Franke, Gunter & Stapleton, Richard C. & Subrahmanyam, Marti G., 1998. "Who Buys and Who Sells Options: The Role of Options in an Economy with Background Risk," Journal of Economic Theory, Elsevier, Elsevier, vol. 82(1), pages 89-109, September.
- Rothschild, Michael & Stiglitz, Joseph E., 1971. "Increasing risk II: Its economic consequences," Journal of Economic Theory, Elsevier, Elsevier, vol. 3(1), pages 66-84, March.
- Gollier, Christian & Schlesinger, Harris, 1996. "Portfolio choice under noisy asset returns," Economics Letters, Elsevier, Elsevier, vol. 53(1), pages 47-51, October.
- Landsberger, Michael & Meilijson, Isaac, 1990. "Demand for risky financial assets: A portfolio analysis," Journal of Economic Theory, Elsevier, Elsevier, vol. 50(1), pages 204-213, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Atsuko SUZUKI).
If references are entirely missing, you can add them using this form.