Equilibrium Pricing in Incomplete Markets

Download or read book Equilibrium Pricing in Incomplete Markets written by Elyes Jouini and published by . This book was released on 2007 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Given exogenously the price process of some asets, we constrain the price process of other assets, which are characterised by their final pay-offs. We deal with an incomplete market framework in a discrete time model and assume the existence of the equilibrium. In this setup, we derive restrictions on the state-price deflators and these restrictions do not depend on a particular choice of utility function. A stochastic volatility model is numerically investigated as an example. Our approach leads to an interval of admissible prices much better than the arbitrage pricing interval.