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We study economies in which agents face Knightian uncertainty about state prices. Knightian uncertainty leads naturally to nonlinear expectations. We introduce a corresponding equilibrium concept with sublinear prices and prove that equilibria exist under weak conditions. In general, such...
Persistent link: https://www.econbiz.de/10011985286
Recent empirical studies suggest a downward sloping term structure of Sharpe ratios. We present a theoretical framework in continuous time that can cope with such a non-flat forward curve of risk prices. The approach departs from an arbitrage-free and incomplete market setting when different...
Persistent link: https://www.econbiz.de/10011932937
We propose a sequential topology on the collection of sub-sigma-algebras included in a separable probability space. We prove compactness of the conditional expectations with respect to L2-bounded random variables along sequences of sub-sigma-algebras. The varying index of measurability is...
Persistent link: https://www.econbiz.de/10011932939
In John Nash’s proofs for the existence of (Nash) equilibria basedon Brouwer’s theorem, an iteration mapping is used. A continuous—time analogue of the same mapping has been studied even earlier byBrown and von Neumann. This differential equation has recently beensuggested as a plausible...
Persistent link: https://www.econbiz.de/10005868464