Arbitrage pricing and equilibrium pricing : compatibility conditions
The problem of fair pricing of contingent claims is well understood in the contex of an arbitrage free, complete financial market, with perfect information : the so-called arbitrage approach permits to construct a unique valuation operator compatible with observed price processes. In the more realistic context of partial information, the equilibrium analysis permits to construct a unique valuation operator which only depends on some particular price processes as well as on the dividends process. In this paper we present these two approaches and we explore their links and the conditions under which they are compatible ; In particular, we derive from the equilibrium conditions some links between the price processes paramaters and those of the dividend processes paramaters
|Date of creation:||2002|
|Date of revision:|
|Publication status:||Published in Collected Papers of the New York University Mathematical Finance Seminar, New York University, pp.131-159, 2002|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00176423|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
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.:
- Araujo,A. & Monteiro,P.K., 1989. "General equilibrium with infinitely many goods: The case of seperable utilities," Discussion Paper Serie A 249, University of Bonn, Germany.
- Merton, Robert C., 1971.
"Optimum consumption and portfolio rules in a continuous-time model,"
Journal of Economic Theory,
Elsevier, vol. 3(4), pages 373-413, December.
- R. C. Merton, 1970. "Optimum Consumption and Portfolio Rules in a Continuous-time Model," Working papers 58, Massachusetts Institute of Technology (MIT), Department of Economics.
- Duffie, Darrell & Zame, William, 1989.
"The Consumption-Based Capital Asset Pricing Model,"
Econometric Society, vol. 57(6), pages 1279-97, November.
- Bick, Avi, 1990. " On Viable Diffusion Price Processes of the Market Portfolio," Journal of Finance, American Finance Association, vol. 45(2), pages 673-89, June.
- Elyès Jouini & Hédi Kallal, 1999.
"Viability and Equilibrium in Securities Markets with Frictions,"
Wiley Blackwell, vol. 9(3), pages 275-292.
- Elyès Jouini & Hédi Kallal, 1997. "Viability and Equilibrium in Securities Markets with Frictions," Working Papers 97-07, Centre de Recherche en Economie et Statistique.
- Elyès Jouini & Hédi Kallal, 1999. "Viability and Equilibrium in Securities Markets with Frictions," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-036, New York University, Leonard N. Stern School of Business-.
- Elyès Jouini & Vincent Porte, 2007. "Efficient Trading Strategies," Working Papers halshs-00176616, HAL.
- Jouini Elyes & Kallal Hedi, 1995. "Martingales and Arbitrage in Securities Markets with Transaction Costs," Journal of Economic Theory, Elsevier, vol. 66(1), pages 178-197, June.
- Duffie, J Darrell & Huang, Chi-fu, 1985. "Implementing Arrow-Debreu Equilibria by Continuous Trading of Few Long-lived Securities," Econometrica, Econometric Society, vol. 53(6), pages 1337-56, November.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- He, Hua & Leland, Hayne, 1993. "On Equilibrium Asset Price Processes," Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 593-617.
- Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, vol. 41(5), pages 867-87, September.
- Bewley, Truman F., 1972. "Existence of equilibria in economies with infinitely many commodities," Journal of Economic Theory, Elsevier, vol. 4(3), pages 514-540, June.
- Elyes Jouini & Clotilde Napp, 1999.
"Continuous Time Equilibrium Pricing of Nonredundant Assets,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
99-008, New York University, Leonard N. Stern School of Business-.
- Elyès Jouini & Clotilde Napp, 1998. "Contiuous Time Equilibrium Pricing of Nonredundant Assets," Working Papers 98-30, Centre de Recherche en Economie et Statistique.
- Bick, Avi, 1987. "On the Consistency of the Black-Scholes Model with a General Equilibrium Framework," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(03), pages 259-275, September.
- Araujo, A. & Monteiro, P. K., 1989. "Equilibrium without uniform conditions," Journal of Economic Theory, Elsevier, vol. 48(2), pages 416-427, August.
- Huyěn Pham & Nizar Touzi, 1996. "Equilibrium State Prices In A Stochastic Volatility Model," Mathematical Finance, Wiley Blackwell, vol. 6(2), pages 215-236.
When requesting a correction, please mention this item's handle: RePEc:hal:journl:halshs-00176423. 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: (CCSD)
If references are entirely missing, you can add them using this form.