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Probability and Computational Finance Seminar
Thames Sae Sue
Carnegie Melllon University
Title: Incomplete Radner equilibrium in pure-jump Levy models

Abstract: We analyze a continuous-time incomplete equilibrium model with exponential investors and pure-jump Levy price processes. Models for prices with jumps demonstrate an effect of incompleteness on the Sharpe ratio, an important economic phenomenon which relates to the equity premium puzzle. Such effect cannot be observed in the Brownian models with exponential investors. In this talk, I will show the existence of incomplete market equilibrium by providing a closed-form solution. Then I will provide simple examples in which we can see a positive effect on the Sharpe ratio.

Date: Monday, April 13, 2015
Time: 4:30 pm
Location: Wean Hall 6423
Submitted by:  Kasper Larsen