How Does Asymmetric Information Create Market Incompleteness?

Anne Eyraud-Loisel ()
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Anne Eyraud-Loisel: Université de Lyon, Université Lyon 1, ISFA, Laboratoire SAF

Methodology and Computing in Applied Probability, 2019, vol. 21, issue 2, 531-538

Abstract: Abstract The aim of this work is to show that incompleteness is due in general not only to a lack of assets, but also to a lack of information. In this paper we present a simple influence model where the influencial agent has access to additional information. This leads to the construction of two models, a complete model and an incomplete model where the only difference is a difference of information. This leads to a simple model of incomplete market where the number of assets is not the cause of incompleteness: incomplete information is the explanation.

Keywords: Information; Asymmetric information; Option pricing; Martingales; Insider trading; Complete market; Incomplete market; 60H10; 60G44; 60H07; 60J70; 91G20; 91B70; 93E11 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s11009-018-9672-x

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