Existence of financial equilibria with restricted participation

Bernard Cornet and Zaier Aouani
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Zaier Aouani: International School of Economics at TSU, Tbilisi, Georgia

No 200909, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

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 num´eraire 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).

Keywords: Restricted participation; portfolio constraints; financial exchange economy; equilibrium; existence; arbitrage-free asset prices (search for similar items in EconPapers)
JEL-codes: C62 D52 D53 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2009-12, Revised 2009-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (46)

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http://www2.ku.edu/~kuwpaper/2009Papers/200909.pdf (application/pdf)

Related works:
Journal Article: Existence of financial equilibria with restricted participation (2009)
Working Paper: Existence of financial equilibria with restricted participation (2009)
Working Paper: Existence of financial equilibria with restricted participation (2009)
Working Paper: Existence of financial equilibria with restricted participation (2009)
Working Paper: Existence of financial equilibria with restricted participation (2009)
Working Paper: Existence of financial equilibria with restricted participation (2009)
Working Paper: Existence of financial equilibria with restricted participation (2009)
Working Paper: Existence of financial equilibria with restricted participation (2009)
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