This paper proves the existence of a general equilibrium in a financial model with transaction costs. The general equilibrium is shown to exist in a model with convex trading technology, in which the agents include consumers, production firms, brokers and dealers. When the trading technology is...

This article concerns the existence of equilibrium in a two-period model with general personal and corporate tax structures. We show that an equilibrium exists if there is a price system under which no consumer or firm has an arbitrage opportunity. The model can be modified to handle non convex...

Most financial asset pricing models assume frictionless, competitive markets that imply the absence of arbitrage opportunities. Given the absence of arbitrage opportunities and complete asset markets, there exists a unique martingale measure that implies martingale pricing formulae and...

This paper expands and tests the approach of Madan and Milne (1994) for pricing contingent claims as elements of a separable Hilbert space. We specialize the Hilbert space basis to the family of Hermite polynomials and use the model to price options on Eurodollar futures. Restrictions on the...

This paper tests the approach of Madan and Milne (1994) and its extension in Abken, Madan, and Ramamurtie (1996) for pricing contingent claims as elements of a separable Hilbert space. We specialize the Hilbert space basis to the family of Hermite polynomials and test the model on S&P 500 index...

Investors in equilibrium are modeled as facing investor specific risk exposures arising from incomplete diversification of personal risks across the space of assets. Personalized asset pricing models reflect these risks. Averaging across the pool of investors we obtain a market asset pricing...

Contingent claims with payoffs depending on finitely many asset prices are modeled as a separable Hilbert space. Under fairly general conditions, including market completeness, it is shown that one may change measure to a reference measure under which asset prices are Gaussian and for which the...

It is generally said that out-of-the-money call options are expensive and one can ask the question from which moneyness level this is the case. Expensive actually means that the price one pays for the option is more than the discounted average payoff one receives. If so, the option bears a...

Options paying the product of put and/or call option payouts at different strikes on two underlying assets are observed to synthesize joint densities and replicate differentiable functions of two underlying asset prices. The pricing of such options is undertaken from three perspectives. The...

It is argued that the growth in the breadth of option strikes traded after the financial crisis of 2008 poses difficulties for the use of Fourier inversion methodologies in volatility surface calibration. Continuous time Markov chain approximations are proposed as an alternative. They are shown...