Endogenous noise trackers in a Radner equilibrium
We prove the existence of an incomplete Radner equilibrium in a model with exponential investors and an endogenous noise tracker. We analyze a coupled system of ODEs and reduce it to a system of two coupled ODEs in order to establish equilibrium existence. As an application, we study the impact of the endogenous noise tracker on welfare by comparing to a model with an exogenous noise trader. We show that the aggregate welfare in the endogenous noise tracker model is bigger for a sufficiently large stock supply, but the welfare comparison depends in a non-trivial manner on the other model parameters.
Code (0)
등록된 구현이 없습니다.
Similar Papers 제목 키워드 기반
Existence of a Radner equilibrium in a model with transaction costs
We prove the existence of a Radner equilibrium in a model with proportional transaction costs on an infinite time horizon and analyze the effect of transaction costs on the endogenously determined interest rate. Two agen…
Radner equilibrium with population growth
We prove the existence of a Radner equilibrium in a model with population growth and analyze the effects on asset prices. A finite population of agents grows indefinitely at a Poisson rate, while receiving unspanned inco…
Resolving a Clearing Member's Default, A Radner Equilibrium Approach
For vanilla derivatives that constitute the bulk of investment banks' hedging portfolios, central clearing through central counterparties (CCPs) has become hegemonic. A key mandate of a CCP is to provide an efficient and…
Sensitivity Analysis of emissions Markets: A Discrete-Time Radner Equilibrium Approach
Emissions markets play a crucial role in reducing pollution by encouraging firms to minimize costs. However, their structure heavily relies on the decisions of policymakers, on the future economic activities, and on the …
Decision MakingSensitivityAn incomplete equilibrium with a stochastic annuity
We prove the global existence of an incomplete, continuous-time finite-agent Radner equilibrium in which exponential agents optimize their expected utility over both running consumption and terminal wealth. The market co…