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A martingale characterization of equilibrium asset price processes

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Summary.

Bick (1987,1990) and He and Leland (1993) demonstrated that not every arbitrage-free Markovian diffusion price process is consistent with an equilibrium approach. We propose a unified framework for these results and we derive a new martingale characterization of equilibrium.

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Authors and Affiliations

  1. GREMAQ, Université de Toulouse I, 21 Allée de Brienne, F-31000 Toulouse, FRANCE (e-mail: decamps@gremaq.univ-tlse1.fr) , , , , , , FR

    J.P. Décamps

  2. Université d'Evry, Boulevard des Coquibus, F-91025 Evry Cedex, FRANCE , , , , , , FR

    A. Lazrak

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  1. J.P. Décamps
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  2. A. Lazrak
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Received: November 4, 1997; revised version: June 10, 1998

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Décamps, J., Lazrak, A. A martingale characterization of equilibrium asset price processes. Econ Theory 15, 207–213 (2000). https://doi.org/10.1007/s001990050007

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  • DOI: https://doi.org/10.1007/s001990050007

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