EconPapers    
Economics at your fingertips  
 

Incomplete markets and derivative assets

François Le Grand and Xavier Ragot ()
Additional contact information
François Le Grand: EMLyon Business School

Sciences Po publications from Sciences Po

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 sharing; Derivative assets (search for similar items in EconPapers)
JEL-codes: G1 G12 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ias, nep-mac and nep-rmg
Date: 2015-09
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Published in Economic Theory, 2015, pp.1-29

Downloads: (external link)
https://spire.sciencespo.fr/hdl:/2441/1p7ctioc2n80 ... incomplet-market.pdf (application/pdf)

Related works:
Journal Article: Incomplete markets and derivative assets (2016) Downloads
Working Paper: Incomplete markets and derivative assets (2016)
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: https://EconPapers.repec.org/RePEc:spo:wpmain:info:hdl:2441/1p7ctioc2n80gp0icks5dssdsa

Access Statistics for this paper

More papers in Sciences Po publications from Sciences Po Contact information at EDIRC.
Bibliographic data for series maintained by Spire @ Sciences Po Library ().

 
Page updated 2019-12-05
Handle: RePEc:spo:wpmain:info:hdl:2441/1p7ctioc2n80gp0icks5dssdsa