Universal bounds for asset prices in heterogeneous economies
type: Item
instance of: scholarly article
title: Universal bounds for asset prices in heterogeneous economies
zbMATH Open document ID: 1164.91018
author: Semyon Malamud
published in: Finance and Stochastics
publication date: 2009-02-28T00:00:00Z
full work available at URL: http://hdl.handle.net/20.500.11850/10981
review text: The author considers general heterogeneous economy with constant relative risk aversion utility function and establishes universal bounds for asset prices. For each agent an artificial homogeneous economy populated solely by this agent is considered, and ``homogeneous'' price of an asset in each of these economies is calculated. The main result corrects and resolves previous conjecture that the risk free rate in heterogeneous economy should lie between the maximal and the minimal ``homogeneous'' risk free rates of the artificial economies. It is proved that the answer depends on the risk aversions of the agents: the upper bound holds when all risk aversions are smaller than one, and the lower bound holds when all risk aversions are larger than one. The results are extended to arbitrary assets.
reviewed by: Yuliya S. Mishura
Mathematics Subject Classification ID: 91B28
Mathematics Subject Classification ID: 91B60
Mathematics Subject Classification ID: 91B64
Mathematics Subject Classification ID: 91B70
zbMATH DE Number: 5520651
zbMATH Keywords: Heterogeneity
zbMATH Keywords: asset prices
zbMATH Keywords: yield curve
zbMATH Keywords: bounds
MaRDI profile type: Publication
OpenAlex ID: W2054938656
cites work: Heterogeneity and option pricing
cites work: Long run forward rates and long yields of bonds and options in heterogeneous equilibria
cites work: A Model of Intertemporal Asset Prices Under Asymmetric Information
DOI: 10.1007/S00780-008-0062-Z
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description: scientific article; zbMATH DE number 5520651