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Incomplete stochastic equilibria for dynamic monetary utility

Constantinos Kardaras, Hao Xing and Gordan \v{Z}itkovi\'c

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Abstract: We study existence and uniqueness of continuous-time stochastic Radner equilibria in an incomplete market model among a group of agents whose preference is characterized by cash invariant time-consistent monetary utilities. An assumption of "smallness" type is shown to be sufficient for existence and uniqueness. In particular, this assumption encapsulates settings with small endowments, small time-horizon, or a large population of weakly heterogeneous agents. Central role in our analysis is played by a fully-coupled nonlinear system of quadratic BSDEs.

New Economics Papers: this item is included in nep-mac and nep-mic
Date: 2015-05, Revised 2017-02
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