Equilibrium Pricing in Incomplete Markets

Abdelhamid Bizid (1) , Elyès Jouini (2)

1 CERMSEM - CEntre de Recherche en Mathématiques, Statistique et Économie Mathématique
2 CEREMADE - CEntre de REcherches en MAthématiques de la DEcision

Given exogenously the price process of some asets, we constrain the price process of other assets, which are characterised by their final pay-offs. We deal with an incomplete market framework in a discrete time model and assume the existence of the equilibrium. In this setup, we derive restrictions on the state-price deflators and these restrictions do not depend on a particular choice of utility function. A stochastic volatility model is numerically investigated as an example. Our approach leads to an interval of admissible prices much better than the arbitrage pricing interval.

Mots clés: incomplete markets; pricing

Domaines: Economies et finances

Abdelhamid Bizid, Elyès Jouini. Equilibrium Pricing in Incomplete Markets. Journal of Financial and Quantitative Analysis, 2005, 40 (4), pp.833-848. ⟨halshs-00176484⟩