Computing Equilibria in Stochastic Finance Economies
We describe a homotopy algorithm for the computation of equilibria in Stochastic Finance Economies. The algorithm solves a nonlinear system of equations consisting of the first-order conditions of the agents' utility maximization problems and market-clearing conditions. Moreover, we discuss the use of a straightforward homotopy approach for local comparative statics. Using our methods we evaluate price, volatility, and welfare effects of options in incomplete asset markets. Citation Copyright 2000 by Kluwer Academic Publishers.
Volume (Year): 15 (2000)
Issue (Month): 1-2 (April)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/economic+theory/journal/10614/PS2|