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INFINITE HORIZON INCOMPLETE MARKETS WITH A CONTINUUM OF STATES

Aloisio Araujo, Paulo Monteiro and M´rio Rui P´ascoa
Authors registered in the RePEc Author Service: Mario Rui Pascoa

Mathematical Finance, 1996, vol. 6, issue 2, 119-132

Abstract: In this paper we address existence of equilibria in an incomplete markets economy with countably many periods and a continuum of states at each node of the infinite tree. We consider two models: one where agents have to honor their commitments and another where default is allowed. In both models, marginal utility of income, at each node, is shown to be bounded, and we prove existence by taking finite‐dimensional approximations and applying Fatou's lemma sequentially.

Date: 1996
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https://doi.org/10.1111/j.1467-9965.1996.tb00074.x

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