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Continuity ofmarketable payoffs with re-trading

Author

Listed:
  • Jean-Marc Bonnisseau

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Achis Chery

    (CREGED - Centre de Recherche en Gestion et Economie du Développement - Université Quisqueya, LS2E - Laboratoire des Sciences pour l’Environnement et l’Energie - UEH - Université d'État d'Haïti)

Abstract

We consider a stochastic financial exchange economy with a finite date-event tree representing time and uncertainty and a financial structure with possibly long-term assets. We address the question of the continuity of the set of marketable payoffs with respect to the asset prices. In a previous paper, we have exhibited a sufficient condition,which is based only on the returns of the assets.However, it is never satisfied in the structures with re-trading [See Bonnisseau and Chéry (Ann Finance 10:523–552, 2014)], which is a very common feature in many papers following the model of Magill and Quinzii (Theory of Incomplete Markets, MIT Press, Cambridge, 1996). The main purpose of this paper is to address this issue. We exhibit a new sufficient condition for general financial structures, which enjoys the property to be inherited by the re-trading extension of a financial structure. So, we pave the way for equilibrium existence results under assumptions only on the fundamentals of the economy.

Suggested Citation

  • Jean-Marc Bonnisseau & Achis Chery, 2022. "Continuity ofmarketable payoffs with re-trading," Post-Print halshs-03523222, HAL.
    • Handle: RePEc:hal:journl:halshs-03523222
    DOI: 10.1007/s00199-021-01404-2
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    References listed on IDEAS

    as
    1. Jean-Marc Bonnisseau & Achis Chery, 2014. "Stability of marketable payoffs with long-term assets," Annals of Finance, Springer, vol. 10(4), pages 523-552, November.
    2. Laura Angeloni & Bernard Cornet, 2005. "Existence Of Financial Equilibria In A Multiperiod Stochastic Economy," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200506, University of Kansas, Department of Economics, revised Feb 2005.
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    9. Iraola, Miguel A. & Torres-Martínez, Juan Pablo, 2014. "Equilibrium in collateralized asset markets: Credit contractions and negative equity loans," Journal of Mathematical Economics, Elsevier, vol. 55(C), pages 113-122.
    10. Aouani, Zaier & Cornet, Bernard, 2011. "Reduced equivalent form of a financial structure," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 318-327.
    11. Aloisio Araujo & Mário Rui Páscoa & Juan Pablo Torres-Martínez, 2002. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Econometrica, Econometric Society, vol. 70(4), pages 1613-1638, July.
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    More about this item

    Keywords

    Incomplete markets · Financial equilibrium · Multi-period model · Long-term assets · Re-traded assets · Financial structures with re-trading;

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • G1 - Financial Economics - - General Financial Markets

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