SCENARIOS FOR PRICE DETERMINATION IN INCOMPLETE MARKETS

S. Z. Xanthopoulos () and A. N. Yannacopoulos ()
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S. Z. Xanthopoulos: Department of Statistics and Actuarial-Financial Mathematics, University of the Aegean, Samos, Greece
A. N. Yannacopoulos: Department of Statistics, Athens University of Economics and Business, Athens, Greece

International Journal of Theoretical and Applied Finance (IJTAF), 2008, vol. 11, issue 05, 415-445

Abstract: We study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios, based on utility pricing. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing considerations. Dynamical schemes modeling the convergence of the buyer and seller prices to a unique price are proposed. The case of exponential utilities is treated in detail, in the simplest possible example of an incomplete market, the trinomial model.

Keywords: Incomplete markets; market games; risk sharing; regret; dynamical schemes (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S0219024908004877

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