Prices and volumes of options: A simple theory of risk sharing when markets are incomplete
Xavier Ragot () and
Francois Le Grand
Additional contact information
Francois Le Grand: EMLyon Business School
No 300, 2010 Meeting Papers from Society for Economic Dynamics
We present a theory of business cycle movements for derivative asset prices and volumes. This theory relies on time-varying heterogeneity among agents in their demand for insurance against aggregate risk. We are able to analytically characterize a general equilibrium in which positive quantities of derivatives are traded. This allows us to explain the informational content of derivative volumes over the business cycle. We reproduce stylized facts about derivative volumes, and perform welfare analysis with respect to the introduction of derivative assets, which notably appears to be not Pareto improving.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: Prices and volumes of options: A simple theory of risk sharing when markets are incomplete (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:red:sed010:300
Access Statistics for this paper
More papers in 2010 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().