Incomplete Markets and Incentives to Set Up an Options Exchange&ast

Franklin Allen and Douglas Gale ()

The Geneva Risk and Insurance Review, 1990, vol. 15, issue 1, 17-46

Abstract: Traditional analyses with incomplete markets take the securities that are traded as exogenous. In this paper we endogenize the market structure by considering incentives to introduce (costly) options exchanges which issue derivative securities. The method of financing the exchange is critical in determining whether the market structure is socially efficient. If the exchange can charge fees to all agents and make every agent's participation a necessary condition for establishing the exchange then the market structure chosen in equilibrium is efficient. However, if either of these conditions is not satisfied then an inefficient market structure may be chosen. The Geneva Papers on Risk and Insurance Theory (1990) 15, 17–46. doi:10.1007/BF01498458

Date: 1990
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.palgrave-journals.com/grir/journal/v15/n1/pdf/grir19902a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/grir/journal/v15/n1/full/grir19902a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:genrir:v:15:y:1990:i:1:p:17-46

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10713

Access Statistics for this article

The Geneva Risk and Insurance Review is currently edited by Michael Hoy and Nicolas Treich

More articles in The Geneva Risk and Insurance Review from Palgrave Macmillan, International Association for the Study of Insurance Economics (The Geneva Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().