Incomplete Markets with Endogenous Portfolio Constraints and Redundant Assets

Seoul Journal of Economics 27 (No. 4 2014): 469-488

20 Pages Posted: 26 Nov 2014

Date Written: November 30, 2014

Abstract

This paper shows that a competitive equilibrium exists in an exchange economy with incomplete financial markets where redundant assets are traded and the asset trading of each agent is subject to endogenous portfolio constraints. The set of budget-feasible portfolios need not be bounded in the presence of redundant assets. To address this problem, we impose the positive semi-independence condition on individual portfolio constraints.

Keywords: Incomplete markets, Competitive equilibrium, Endogenous portfolio constraints, Redundant assets, Constrained arbitrage

JEL Classification: C62, D51

Suggested Citation

Hahn, Guangsug, Incomplete Markets with Endogenous Portfolio Constraints and Redundant Assets (November 30, 2014). Seoul Journal of Economics 27 (No. 4 2014): 469-488, Available at SSRN: https://ssrn.com/abstract=2530844

Guangsug Hahn (Contact Author)

POSTECH ( email )

San 31, Hoja-dong
Nam-gu
Pohang, 790-784
Korea
054-279-2031 (Phone)

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