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Risk sharing and retrading in incomplete markets |
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| Authors: | Piero Gottardi Rohit Rahi |
| Institution: | 1. Department of Economics, European University Institute, Villa San Paolo, Via della Piazzuola 43, 50133, Florence, Italy 2. Dipartimento di Scienze Economiche, Università di Venezia, Fondamenta San Giobbe, Cannaregio, 873, 30121, Venezia, Italy 3. Department of Finance and Financial Markets Group, London School of Economics, Houghton Street, London, WC2A 2AE, UK |
| Abstract: | At a competitive equilibrium of an incomplete-markets economy agents’ marginal valuations for the tradable assets are equalized ex-ante. We characterize the finest partition of the state space conditional on which this equality holds for any economy. This leads naturally to a necessary and sufficient condition on information that would induce agents to retrade, if such information was to become publicly available after the initial round of trade. |
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