Incomplete stochastic equilibria for dynamic monetary utility
Probability
2017-02-07 v2 Mathematical Finance
Abstract
We study existence and uniqueness of continuous-time stochastic Radner equilibria in an incomplete market model among a group of agents whose preference is characterized by cash invariant time-consistent monetary utilities. An assumption of "smallness" type is shown to be sufficient for existence and uniqueness. In particular, this assumption encapsulates settings with small endowments, small time-horizon, or a large population of weakly heterogeneous agents. Central role in our analysis is played by a fully-coupled nonlinear system of quadratic BSDEs.
Cite
@article{arxiv.1505.07224,
title = {Incomplete stochastic equilibria for dynamic monetary utility},
author = {Constantinos Kardaras and Hao Xing and Gordan Žitković},
journal= {arXiv preprint arXiv:1505.07224},
year = {2017}
}
Comments
33 pages - significantly revised version, extending from exponential to general dynamic monetary utilities