Incomplete stochastic equilibria for dynamic monetary utility

2015/05/27 by Kardaras, Constantinos, Xing, Hao, Žitković, Gordan
#FOS: Economics and business #FOS: Mathematics #Mathematical Finance (q-fin.MF) #Probability (math.PR)

paper · doi:10.48550/arxiv.1505.07224

Abstract

We study existence and uniqueness of continuous-time stochastic Radner equilibria in an incomplete market model among a group of agents whose preference is characterized by cash invariant time-consistent monetary utilities. An assumption of "smallness" type is shown to be sufficient for existence and uniqueness. In particular, this assumption encapsulates settings with small endowments, small time-horizon, or a large population of weakly heterogeneous agents. Central role in our analysis is played by a fully-coupled nonlinear system of quadratic BSDEs.

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