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Existence of financial equilibria with restricted participation

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Author Info
 Zaier Aouani () (International School of Economics at TSU, Tbilisi, Republic of Georgia)
 Bernard Cornet () (University of Kansas, Lawrence, Kansas, United States and University of Paris 1 Pantheon-Sorbonne, Paris, France)

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Abstract

We consider a two-date model of a financial exchange economy with finitely many agents having nonordered preferences and portfolio constraints. There is a market for physical commodities at any state today or tomorrow and financial transfers across time and across states are allowed by means of finitely many nominal assets or numeraire assets. We prove a general existence result of equilibria for such a financial exchange economy in which portfolios are defined by linear constraints, extending the framework of linear equality constraints by Balasko et al. (1990), and the existence results in the unconstrained case by Cass (1984, 2006), Werner (1985), Duffie (1987), and Geanakoplos and Polemarchakis (1986). Our main result is a consequence of an auxiliary result, also of interest for itself, in which agents' portfolio constraints are defined by general closed convex sets and the financial structure is assumed to satisfy a "nonredundancy-type" assumption, weaker than the ones in Radner (1972) and Siconolfi (1989).

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File URL: http://www.iset.ge/files/001-09.pdf
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Publisher Info
Paper provided by International School of Economics at TSU, Tbilisi, Republic of Georgia in its series Working Papers with number 001-09.

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Length: 30 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:tbs:wpaper:09-001

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Related research
Keywords: Restricted participation; portfolio constraints; financial exchange economy; equilibrium; existence; arbitrage-free asset prices;

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Find related papers by JEL classification:
C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium
D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

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This page was last updated on 2009-11-19.

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