Taylor approximation of incomplete Radner equilibrium models

Wednesday, April 8, 2015 - 10:30 to 11:30
Speaker Information
Jin Hyuk Choi
Carnegie Mellon University

Abstract or Additional Information

Abstract: In the setting of exponential investors and uncertainty governed by Brownian motions we first prove the existence of an incomplete equilibrium for a general class of models. We then introduce a tractable class of exponential-quadratic models and prove that the corresponding incomplete equilibrium is characterized by a coupled set of Riccati equations. Finally, we prove that these exponential-quadratic models can be used to approximate the incomplete models we studied in the first part.