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Controlling Price Volatility Through Financial Innovation

  • Alessandro Citanna
  • Karl Schmedders

In this paper, the authors study the possibility of controlling asset price volatility through financial innovation in a three-period finite competitive exchange economy with incomplete financial markets and retrading.

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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1338.

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Date of creation: Jan 2002
Date of revision:
Handle: RePEc:nwu:cmsems:1338
Contact details of provider: Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
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  1. Zapatero, Fernando, 1998. "Effects of financial innovations on market volatility when beliefs are heterogeneous," Journal of Economic Dynamics and Control, Elsevier, vol. 22(4), pages 597-626, April.
  2. Atsushi Kajii & Antonio Villanacci & Alessandro Citanna, 1998. "Constrained suboptimality in incomplete markets: a general approach and two applications," Economic Theory, Springer, vol. 11(3), pages 495-521.
  3. Thorsten Hens, 2000. "Do Sunspots Matter when Spot Market Equilibria Are Unique?," Econometrica, Econometric Society, vol. 68(2), pages 435-441, March.
  4. Kubler, Felix & Schmedders, Karl, 2000. "Computing Equilibria in Stochastic Finance Economies," Computational Economics, Society for Computational Economics, vol. 15(1-2), pages 145-72, April.
  5. Elul Ronel, 1995. "Welfare Effects of Financial Innovation in Incomplete Markets Economies with Several Consumption Goods," Journal of Economic Theory, Elsevier, vol. 65(1), pages 43-78, February.
  6. Tito Pietra, 2001. "The set of sunspot equilibria in economies with incomplete financial markets: variable asset prices," Economic Theory, Springer, vol. 18(3), pages 649-659.
  7. David Cass & Alessandro Citanna, 1998. "Pareto improving financial innovation in incomplete markets," Economic Theory, Springer, vol. 11(3), pages 467-494.
  8. Elul, Ronel, 1997. "Financial innovation, precautionary saving and the risk-free rate," Journal of Mathematical Economics, Elsevier, vol. 27(1), pages 113-131, February.
  9. Pietra, T., 1991. "The structure of the set of sunspot equilibria in economies with incomplete financial markets," CORE Discussion Papers 1991032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Chris I. Telmer, 1991. "Asset Pricing Puzzles and Incomplete Markets," Working Papers 806, Queen's University, Department of Economics.
  11. Detemple, Jerome B & Selden, Larry, 1991. "A General Equilibrium Analysis of Option and Stock Market Interactions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(2), pages 279-303, May.
  12. Rios-Rull, Jose-Victor, 1994. "On the quantitative importance of market completeness," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 463-496, December.
  13. Cass, David, 1992. "Sunspots and Incomplete Financial Markets: The General Case," Economic Theory, Springer, vol. 2(3), pages 341-58, July.
  14. Duffie, Darrell & Shafer, Wayne, 1986. "Equilibrium in incomplete markets: II : Generic existence in stochastic economies," Journal of Mathematical Economics, Elsevier, vol. 15(3), pages 199-216, June.
  15. Laurent-Emmanuel Calvet, 2001. "Incomplete Markets and Volatility," Post-Print hal-00477462, HAL.
  16. Gottardi, Piero & Kajii, Atsushi, 1999. "The Structure of Sunspot Equilibria: The Role of Multiplicity," Review of Economic Studies, Wiley Blackwell, vol. 66(3), pages 713-32, July.
  17. Gyutaeg Oh, 1996. "Some Results in the CAPM with Nontraded Endowments," Management Science, INFORMS, vol. 42(2), pages 286-293, February.
  18. repec:cup:cbooks:9780521265140 is not listed on IDEAS
  19. Smale, S., 1974. "Global analysis and economics III : Pareto Optima and price equilibria," Journal of Mathematical Economics, Elsevier, vol. 1(2), pages 107-117, August.
  20. Robert J. Shiller, 1980. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," NBER Working Papers 0456, National Bureau of Economic Research, Inc.
  21. Siconolfi, P & Villanacci, A, 1991. "Real Indeterminacy in Incomplete Financial Market Economies without Aggregate Risk," Economic Theory, Springer, vol. 1(3), pages 265-76, July.
  22. repec:cup:cbooks:9780521388702 is not listed on IDEAS
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