Incomplete Financial Markets and Jumps in Asset Prices

Publikation: Working paperForskning

Dokumenter

  • DP 09-12

    Forlagets udgivne version, 181 KB, PDF-dokument

  • Hervé Crès
  • Tobias Ejnar Markeprand
  • Mich Tvede
A dynamic pure-exchange general equilibrium model with uncertainty is studied. Fundamentals are supposed to depend continuously on states of nature. It is shown that: 1. if financial markets are complete, then asset prices vary continuously with states of nature, and; 2. if financial markets are incomplete, jumps in asset prices may be unavoidable. Consequently incomplete financial markets may increase volatility in asset prices significantly.
OriginalsprogEngelsk
UdgiverDepartment of Economics, University of Copenhagen
Antal sider15
StatusUdgivet - 2009

Bibliografisk note

JEL classification: D52, D53, G12

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