Incomplete Markets: "Financial Engineering" of Transverse Asset Structures

Jean-Marc Bottazzi

Papiers d'Economie Mathématique et Applications from Université Panthéon-Sorbonne (Paris 1)

Abstract: In a multiperiod economy with incomplete markets and assets that exhibit a payoff depending on price history, we show that one need not perturb back office and settlement feature of assets to get endowment generic existence of an equilibrium. We exhibit a class of assets -transverse assets - and use the backward induction pricing structure to show that perturbation of maturity payoffs provide enough leverage to ensure endowment generic existence of an equilibrium. As an application of this, we prove a conjecture by Magill and Quinzii that commodity forward contracts always lead to endowment generic existence of an equilibrium (even in the multiperiod case).

Keywords: MARKET; PRICES; GENERIC EXISTENCE (search for similar items in EconPapers)
JEL-codes: C62 D50 D52 (search for similar items in EconPapers)
Pages: 28 pages
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:fth:pariem:1999-64

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