Existence of financial equilibria with restricted participation

Zaier Aouani, Bernard Cornet

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

We consider a two-date model of a financial exchange economy with finitely many agents having nonordered preferences and portfolio constraints. There is a market for physical commodities at any state today or tomorrow and financial transfers across time and across states are allowed by means of finitely many nominal assets or numéraire assets. We prove a general existence result of equilibria for such a financial exchange economy in which portfolios are defined by linear constraints, extending the framework of linear equality constraints by Balasko et al. (1990), and the existence results in the unconstrained case by Cass (1984, 2006), Werner (1985), Duffie (1987), and Geanakoplos and Polemarchakis (1986). Our main result is a consequence of an auxiliary result, also of interest for itself, in which agents' portfolio constraints are defined by general closed convex sets and the financial structure is assumed to satisfy a "nonredundancy-type" assumption, weaker than the ones in Radner (1972) and Siconolfi (1989).

Original languageEnglish
Pages (from-to)772-786
Number of pages15
JournalJournal of Mathematical Economics
Volume45
Issue number12
DOIs
Publication statusPublished - Dec 20 2009
Externally publishedYes

Fingerprint

Exchange Economy
Linear Constraints
Existence Results
Equality Constraints
Closed set
Date
Convex Sets
Categorical or nominal
Participation
Exchange economy
Restricted participation
Assets
Portfolio constraints
Financial equilibrium
Model
Market
Framework
Financial structure
Commodities
Equality

Keywords

  • Arbitrage-free asset prices
  • Equilibrium
  • Existence
  • Financial exchange economy
  • Portfolio constraints
  • Restricted participation

ASJC Scopus subject areas

  • Economics and Econometrics
  • Applied Mathematics

Cite this

Existence of financial equilibria with restricted participation. / Aouani, Zaier; Cornet, Bernard.

In: Journal of Mathematical Economics, Vol. 45, No. 12, 20.12.2009, p. 772-786.

Research output: Contribution to journalArticle

Aouani, Zaier ; Cornet, Bernard. / Existence of financial equilibria with restricted participation. In: Journal of Mathematical Economics. 2009 ; Vol. 45, No. 12. pp. 772-786.
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