Network modeling of international financialequilibria with hedging

Anna Nagurney and Stavros Siokos

Annals of Operations Research, 1998, vol. 82, issue 0, 139-160

Abstract: In this paper, we develop an international financial equilibrium model with hedging inthe form of futures and options contracts. We identify the network structure of the individualsectors' optimization problems out of equilibrium and establish the network structureof the entire international financial economy in equilibrium. We formulate the governingequilibrium conditions as a finite-dimensional variational inequality problem and thenpresent some qualitative properties. Finally, we propose a computational procedure, alongwith convergence results, which resolves the variational inequality problem into networksubproblems with special structure, each of which can then be solved exactly and in closedform. Copyright Kluwer Academic Publishers 1998

Date: 1998
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DOI: 10.1023/A:1018950300861

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