English, Article, Journal or magazine article edition: Ambiguity Aversion and Incompleteness of Financial Markets Sujoy Mukerji; Jean-Marc Tallon

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/20429
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Ambiguity Aversion and Incompleteness of Financial Markets
Author
  • Sujoy Mukerji
  • Jean-Marc Tallon
Physical Description
  • preprint
Notes
  • RePEc:hal:cesptp:halshs-00174539_v1
  • It is widely thought that incomes risks can be shared by trading infinancial assets. But financial assets typically carry some riskidiosyncratic to them, hence, disposing incomes risk using financial assetswill involve buying into the inherent idiosyncratic risk. However, standardtheory argues that diversification would reduce the inconvenience ofidiosyncratic risk to arbitrarily low levels. This argument is less robustthan what standard theory leads us to believe: ambiguity aversion canexacerbate the tension between the two kinds of risks to the point thatclasses of agents may not want to trade some financial assets. Thus,theoretically, the effect of ambiguity aversion on financial markets is tomake the risk sharing opportunities offered by financial markets lesscomplete than it would be otherwise.
  • incomplete markets; ambiguity aversion
  • RePEc:hal:journl:halshs-00174539_v1
  • It is widely thought that incomes risks can be shared by trading in financial assets. But financial assets typically carry some risk idiosyncratic to them, hence, disposing incomes risk using financial assets will involve buying into the inherent idiosyncratic risk. However, standard theory argues that diversification would reduce the inconvenience of idiosyncratic risk to arbitrarily low levels. This argument is less robust than what standard theory leads us to believe: ambiguity aversion can exacerbate the tension between the two kinds of risk to the point that classes of agents may not want to trade some financial assets. Thus, theoretically , the effect of ambiguity aversion on financial markets is to make the risk sharing opportunities offered by financial markets less complete than it would be otherwise.
  • ambiguity aversion, incomplete markets, sub-optimal risk sharing
  • RePEc:oxf:wpaper:046
Language
  • English
Contributed by
OAIster

Get this edition

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment