Arbitrage pricing and equilibrium pricing: compatibility conditions

Elyès Jouini () and Clotilde Napp

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Abstract: The problem of fair pricing of contingent claims is well understood in the contex of an arbitrage free, complete financial market, with perfect information : the so-called arbitrage approach permits to construct a unique valuation operator compatible with observed price processes. In the more realistic context of partial information, the equilibrium analysis permits to construct a unique valuation operator which only depends on some particular price processes as well as on the dividends process. In this paper we present these two approaches and we explore their links and the conditions under which they are compatible ; In particular, we derive from the equilibrium conditions some links between the price processes paramaters and those of the dividend processes paramaters

Keywords: Arbitrage; equilibrium; optimality; incomplete markets; nonredudant assets; derivatives pricing (search for similar items in EconPapers)
Date: 2002
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00176423v1
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Published in Collected Papers of the New York University Mathematical Finance Seminar, New York University, pp.131-159, 2002

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00176423

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