Incomplete Stochastic Equilibria with Exponential Utilities: Close to Pareto Optimality

35 Pages Posted: 28 May 2015

See all articles by Constantinos Kardaras

Constantinos Kardaras

London School of Economics & Political Science (LSE)

Hao Xing

London School of Economics & Political Science (LSE)

Gordan Zitkovic

University of Texas at Austin

Date Written: May 28, 2015

Abstract

We study existence and uniqueness of continuous-time stochastic Radner equilibria in an incomplete markets model. An assumption of "smallness'' type - imposed through the new notion of "closeness to Pareto optimality'' - is shown to be sufficient for existence and uniqueness. Central role in our analysis is played by a fully-coupled nonlinear system of quadratic BSDEs.

Keywords: backward stochastic differential equations, general equilibrium, incomplete markets, Radner equilibrium, systems of BSDE

Suggested Citation

Kardaras, Constantinos and Xing, Hao and Zitkovic, Gordan, Incomplete Stochastic Equilibria with Exponential Utilities: Close to Pareto Optimality (May 28, 2015). Available at SSRN: https://ssrn.com/abstract=2611557 or http://dx.doi.org/10.2139/ssrn.2611557

Constantinos Kardaras

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Hao Xing (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Gordan Zitkovic

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

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