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Time, Uncertainty and Incomplete Markets

  • Antonio Villanacci
  • Laura Carosi
  • Pierluigi Benevieri
  • Andrea Battinelli
Chapter

Abstract

In this chapter, we discuss the model of an exchange economy presented in Chapter 8 without Assumption c3, i.e., we introduce time and uncertainty. In Section 1, we present that more general framework keeping Assumption h5 — market completeness, and we discuss the need for its removal and the introduction of a financial side of the economy. In Section 2, we formalize a way of introducing financial assets, define the notion of complete financial markets and study the relationship with complete markets. Finally, the definition of incomplete financial markets is given and the main fundamental results, which are going to be shown in the following chapters, are summarized.

Keywords

Financial Market Financial Asset Return Matrix Price Vector Incomplete Market 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science+Business Media Dordrecht 2002

Authors and Affiliations

  • Antonio Villanacci
    • 1
  • Laura Carosi
    • 2
  • Pierluigi Benevieri
    • 1
  • Andrea Battinelli
    • 3
  1. 1.Università degli Studi di FirenzeItaly
  2. 2.Università degli Studi di PisaItaly
  3. 3.Università degli Studi di SienaItaly

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