Journal article

Equilibrium in continuous-time financial markets: endogenously dynamically complete markets

Robert M Anderson, Roberto C Raimondo

ECONOMETRICA | WILEY-BLACKWELL | Published : 2008

Abstract

We prove existence of equilibrium in a continuous-time securities market in which the securities are potentially dynamically complete: the number of securities is at least one more than the number of independent sources of uncertainty. We prove that dynamic completeness of the candidate equilibrium price process follows from mild exogenous assumptions on the economic primitives of the model. Our result is universal, rather than generic: dynamic completeness of the candidate equilibrium price process and existence of equilibrium follow from the way information is revealed in a Brownian filtration, and from a mild exogenous nondegeneracy condition on the terminal security dividends. The nondeg..

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