Equilibrium of financial derivative markets under portfolio insurance constraints

Philippe Bertrand and Jean-Luc Prigent

Economic Modelling, 2016, vol. 52, issue PA, 278-291

Abstract: This paper examines the equilibrium of financial portfolios under insurance constraints on terminal wealth. We consider a single period economy in which agents search to maximize the expected utilities of their wealth at maturity. Three main classes of financial assets are considered: a riskless asset (usually the bond), a risky asset (the stock) and European options of all strikes (corresponding to financial derivatives). Both partial and general optimal financial equilibria are determined and analyzed for quite general utility functions and insurance constraints.

Keywords: Optimal positioning; Financial derivatives; Portfolio insurance; Financial equilibrium (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:52:y:2016:i:pa:p:278-291

DOI: 10.1016/j.econmod.2014.10.009

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