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Incomplete Markets : "Financial Engineering" of Transverse Asset Structures


  • Bottazzi, J.-M.


In a multiperiod economy with incomplete markets and assets that exhibit a payoff depending on price history, we show that one need not perturb back office and settlement feature of assets to get endowment generic existence of an equilibrium. We exhibit a class of assets -transverse assets - and use the backward induction pricing structure to show that perturbation of maturity payoffs provide enough leverage to ensure endowment generic existence of an equilibrium. As an application of this, we prove a conjecture by Magill and Quinzii that commodity forward contracts always lead to endowment generic existence of an equilibrium (even in the multiperiod case).

Suggested Citation

  • Bottazzi, J.-M., 1999. "Incomplete Markets : "Financial Engineering" of Transverse Asset Structures," Papiers d'Economie Mathématique et Applications 1999-64, Université Panthéon-Sorbonne (Paris 1).
  • Handle: RePEc:fth:pariem:1999-64

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    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets


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