投资金融学方面的书籍foassetpricing6.pdfVIP

Chapter VI. Valuation in Complete Market Economies The objective in this chapter is to present results that are derivable without using specific assumptions about the structure of the economy. We discuss results that follow from general equilibrium arguments. 1. COMPLETE MARKETS p to this point we have often used the concept of p erfect markets. Perfect markets in brief are perfectly Ucompetitive and frictionless. This concept may apply in a certainty as well as an uncertainty environment. The idea of complete markets is completely different. It applies only to an uncertainty environment and does not presume perfect competition or absence of frictions. (a) Definition A complete set of markets refers to the situation where every contingency is insurable. That is, one could insure against every possible state of the economy at a market price. More specifically, for every possible outcome of the economic process, it is possible in advance to construct a portfolio in such a way that you receive a real return under that outcome, independent of what you get under the other possible outcomes. So, in theory, you can make a list of all the possibilities and calculate in advance how much you will be able to consume for each possibility if it materializes. Of course, you could then eliminate all uncertainty by guaranteeing identical consumption levels for each possible state. You likely would not do so, though, since insurance for different states will have different costs. Old-style economists might say that complete markets change an “uncertain” environment to a merely “risky” environment, but we will continue to use the terms risk and uncertainty interchangeably to describe environments with complete or incomplete markets. (b) Arrow-Debreu Securities Arrow-Debreu securities are defined as payi