How Does Asymmetric Information Create Market Incompleteness?

Anne Eyraud-Loisel ()
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Anne Eyraud-Loisel: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon

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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 inuence model where the inuencial agent has access to additional information. This leads to the construction of two models, a complete model and an incomplete model where the only dierence is a dierence 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 · martin-gales · insider trading · complete market · incomplete market AMS Classication (2000): 60H10, 60G44, 60H07, 60J75, 91G20, 91B70, 93E11. JEL Classication: C60,G11,G14.

Keywords: incomplete market; Information; asymmetric information; option pricing; martin-gales; Insider trading; complete market · (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cfn and nep-mic
Note: View the original document on HAL open archive server: https://hal.science/hal-01998386v1
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Published in Methodology and Computing in Applied Probability, 2019, 21 (2), pp.531-538. ⟨10.1007/s11009-018-9672-x⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01998386

DOI: 10.1007/s11009-018-9672-x

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