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Finance and Stochastics

, Volume 8, Issue 2, pp 241–259 | Cite as

Multi-agent investment in incomplete markets

  • Jianming Xia
Article

Abstract.

The problem of the expected utility maximization in incomplete markets for a single agent is well understood in a fairly general setting. This paper studies the problem for the multi-agent case. For this case a cooperative investment game is posed as follows: firstly collect all agents’ capital together at the initial time, then invest the total capital in a trading strategy, and finally divide the terminal wealth of the trading strategy and each of them gets a part. We give a characterization of Pareto optimal cooperative strategies and a characterization of situations where cooperation strictly Pareto dominates non cooperation, and prove that the core of the cooperative investment game is non-empty under mild conditions using Scarf theorem.

Keywords:

Cooperative investment Pareto optimum core incomplete markets 

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Copyright information

© Springer-Verlag Berlin/Heidelberg 2004

Authors and Affiliations

  1. 1.Institute of Applied MathematicsAcademy of Mathematics and System Sciences, Chinese Academy of SciencesBeijingChina

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