Financial and Actuarial Mathematics: Time Table
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PV Schachermayer (Tuesday 16:30-18:00, TU FH, Turm B, 2.Stock, HS 8)
19.12.2000 - Jan Werner: Implementing Arrow-Debreu Equilibria
by Trading Infinitely-Lived Securities
Abstract:
We show that Arrow-Debreu equilibria with countably additive prices in
infinite-time economy under uncertainty can be implemented by trading
infinitely-lived securities in complete sequential markets under two
different portfolio feasibility constraints: wealth constraint, and
bounded borrowing constraint. Sequential equilibria with no price
bubbles implement Arrow-Debreu equilibria, while those with price
bubbles implement Arrow-Debreu equilibria with transfers. The transfers
are given by the value of price bubbles on initial portfolio holdings.
Price bubbles may arise in sequential equilibrium under the wealth
constraint, but not under the bounded borrowing constraint.