IDEAS home Printed from https://ideas.repec.org/p/cir/cirwor/97s-12.html
   My bibliography  Save this paper

Equilibrium Asset Prices and No-Arbitrage with Portfolio Constraints

Author

Listed:
  • Jérôme B. Detemple
  • Shashidhar Murthy

Abstract

We examine intertemporal asset pricing when short sales are constrained in proportion to the value of an investor's portfolio. All assets' prices exceed every investor's marginal utility of consumption-based valuation of the associated dividends if every investor finds himself constrained in some asset in some state; we exhibit such an equilibrium. An asset's price decomposes into three (investor-specific) components: the consumption-value of its dividends, a speculative-value premium, and a collateral-value premium. The validity of the no-arbitrage pricing approach is shown to depend critically on the difference between real securities and their synthetic counterparts. Cet article examine l'évaluation intertemporelle des titres financiers lorsque les ventes à découvert sont limitées en proportion à la valeur du portefeuille de l'investisseur. Le prix de tout actif dépasse, pour tout investisseur, la valorisation de ses dividendes basée sur l'utilité marginale de consommation individuelle, lorsque chaque investisseur se trouve contraint dasn un actif quelconque dans un état quelconque; nous démontrons l'existence d'un tel équilibre. Le prix d'un actif a trois composantes : la valeur de consommation de ses dividendes, une prime de valeur spéculative, et une prime de valeu de collatéral. La validité de l'approche de validation fondée sur l'absence d'arbitrage dépend de manière critique de la différence entre un actif réel et sa contrepartie synthétique.

Suggested Citation

  • Jérôme B. Detemple & Shashidhar Murthy, 1997. "Equilibrium Asset Prices and No-Arbitrage with Portfolio Constraints," CIRANO Working Papers 97s-12, CIRANO.
  • Handle: RePEc:cir:cirwor:97s-12
    as

    Download full text from publisher

    File URL: http://www.cirano.qc.ca/files/publications/97s-12.pdf
    Download Restriction: no

    More about this item

    Keywords

    Equilibrium asset prices; no-arbitrage; frictions; consumptiom-value; speculative-value; collateral-value; derivative markets; Prix d'équilibre des titres; absence d'arbitrage; frictions; valeur de consommation; valeur spéculative; valeur de collatéral; titres dérivés;

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    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:cir:cirwor:97s-12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster). General contact details of provider: http://edirc.repec.org/data/ciranca.html .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.