Economics at your fingertips  

Incomplete markets and derivative assets

François Legrand and Xavier Ragot ()
Additional contact information
François Legrand: emlyon business school

Post-Print from HAL

Abstract: We analyze derivative asset trading in an economy in which agents face both aggregate and uninsurable idiosyncratic risks. Insurance markets are incomplete for idiosyncratic risk and, possibly, for aggregate risk as well. However, agents can exchange insurance against aggregate risk through derivative assets such as options. We present a tractable framework, which allows us to characterize the extent of risk sharing in this environment. We show that incomplete insurance markets can explain some properties of the volume of traded derivative assets, which are difficult to explain in complete market economies.

Keywords: incomplete markets; heterogeneous agent models; imperfect risk sharig; derivative assets (search for similar items in EconPapers)
Date: 2016-08
Note: View the original document on HAL open archive server:
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Published in Economic Theory, Springer Verlag, 2016, 62 (3), pp.517-545. ⟨10.1007/s00199-015-0912-9⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Incomplete markets and derivative assets (2016) Downloads
Working Paper: Incomplete markets and derivative assets (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().

Page updated 2019-11-22
Handle: RePEc:hal:journl:halshs-01513312