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research article

Endogenous Completeness of Diffusion Driven Equilibrium Markets

Hugonnier, Julien  
•
Malamud, Semyon  
•
Trubowitz, Eugene
2012
Econometrica

We study the existence of dynamic equilibria with endogenously complete markets in continuous-time, heterogenous agents economies driven by diffusion processes. Our main results show that under appropriate conditions on the transition density of the state variables, market completeness can be deduced from the primitives of the economy. In particular, we prove that a sufficient condition for market completeness is that the volatility of dividends be invertible and provide higher order conditions that apply when this condition fails as is the case in the presence of fixed income securities. In contrast to previous research, our formulation does not require that securities pay terminal dividends, and thus allows for both finite and infinite horizon economies.

  • Details
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Type
research article
DOI
10.3982/ECTA8783
Web of Science ID

WOS:000304466200009

Author(s)
Hugonnier, Julien  
Malamud, Semyon  
Trubowitz, Eugene
Date Issued

2012

Publisher

Econometric Society

Published in
Econometrica
Volume

80

Issue

3

Start page

1249

End page

1270

Subjects

Continuous-time asset pricing

•

dynamic market completeness

•

general equilibrium theory

•

Term Structure

•

Existence

•

Information

•

Rates

Editorial or Peer reviewed

NON-REVIEWED

Written at

EPFL

EPFL units
SFI-JH  
SFI-SM  
Available on Infoscience
April 21, 2015
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/113435
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