 Market Resolution and Valuation in Incomplete MarketsJournal of Financial and Quantitative Analysis, 1984, vol. 19, issue 1, 29-44 Abstract: The Arrow-Debreu approach to general equilibrium in an economy has been recognized as one of the most general and conceptually elegant frameworks for the study of financial problems under uncertainty [2], [9]. Equally well known is its elusiveness when it comes to ready application to practical problems (like capital budgeting) or empirical testing. (See [6], [15]–[18].) However, some recent research (see [1], [3], [6], [12]–[16], [18], and [19]) has made a serious attempt to put the state-preference theoretic model in an operational setting. Breeden and Litzenberger [6] have developed an interesting approach to derive constructively the prices of elementary Arrow-Debreu securities from the prices of call options on aggregate consumption. Banz and Miller [3] use a similar technique to value capital budgeting projects based on values for state-contingent claims computed from prices of call options written on the market portfolio. The “supershare” securities proposed by Hakansson [14]–[16] and related work by Garman [13], Ross [24], etc., have also served to give the so-called “state-contingent” approach a practical flavor. Date: 1984 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:19:y:1984:i:01:p:29-44_01 Access Statistics for this article More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK. |
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