A model for international capital markets closure in an economy with incomplete markets and short sales

Mondher Bellalah and Detao Zhang

Economic Modelling, 2017, vol. 67, issue C, 316-324

Abstract: Using a two-country dynamic optimization model, we investigate the impact of exchange risk, incomplete information and short sales constraints on international portfolio decisions around market closure. Using optimal control theory, we provide solutions and simulation results. Our model can be applied to solve several problems in financial economics in the presence of market closure, information asymmetry and short sales constraints.

Keywords: Incomplete markets; Market Closure; Short sales; Optimal control theory; Dynamic programming (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:67:y:2017:i:c:p:316-324

DOI: 10.1016/j.econmod.2017.01.019

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