On monotone completion of risk markets: Limit results for incomplete risk markets
Optimization and Control
2025-04-28 v1 Risk Management
Abstract
We consider a competitive market with risk-averse participants. We assume that agents' risks are measured by coherent risk measures introduced by Artzner et al. (1999). Fundamental theorems of welfare economics have long established the equivalence of competitive equilibria and system welfare optimization (see, e.g., Samuelson (1947)). These have been extended to the case of risk-averse agents with complete risk markets in Ralph and Smeers (2015). In this paper, we consider risk trading in incomplete markets and introduce a mechanism to complete the market iteratively while monotonically enhancing welfare.
Keywords
Cite
@article{arxiv.2504.18436,
title = {On monotone completion of risk markets: Limit results for incomplete risk markets},
author = {Iman Khajepour and Geoffrey Pritchard and Danny Ralph and Golbon Zakeri},
journal= {arXiv preprint arXiv:2504.18436},
year = {2025}
}
Comments
Submitted to Operations Research Letters