Incomplete Financial Markets and Jumps in Asset Prices
Publikation: Working paper › Forskning
Dokumenter
- DP 09-12
Forlagets udgivne version, 181 KB, PDF-dokument
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.
Originalsprog | Engelsk |
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Udgiver | Department of Economics, University of Copenhagen |
Antal sider | 15 |
Status | Udgivet - 2009 |
Bibliografisk note
JEL classification: D52, D53, G12
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