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Annals of Finance

, 6:107 | Cite as

Partial equilibria with convex capital requirements: existence, uniqueness and stability

  • Michail Anthropelos
  • Gordan Žitković
Research Article

Abstract

We consider several risk-averse financial agents who negotiate the price of a bundle of contingent claims in an incomplete semimartingale model of a financial market. Assuming that the agents’ risk preferences are modeled by convex capital requirements, we define and analyze their demand functions and propose a notion of a partial equilibrium price. In addition to sufficient conditions for the existence and uniqueness, we also show that the equilibrium prices are stable with respect to misspecifications of agents’ risk preferences.

Keywords

Acceptance sets Convex capital requirements Incomplete markets Mutually agreeable claims Partial equilibrium allocation Partial equilibrium price Stability of equilibria 

Mathematics Subject Classification (2000)

Primary 91B70 Secondary 91B30 60G35 

JEL Classification

G11 G12 C62 

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Copyright information

© Springer-Verlag 2009

Authors and Affiliations

  1. 1.Department of MathematicsThe University of Texas at AustinAustinUSA

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