Template-Type: ReDIF-Paper 1.0
Title: Non-Existence and Inefficiency of Equilibria with American Options and Convertible Bonds
Author-Name: Charles M. Kahn
Author-Name: Stefan Krasa

Author-Postal: 
Author-Phone: 
Author-Homepage: 
Classification-JEL: 
Keywords: 
Abstract: We analyze three different examples of economies with incomplete
 financial markets. In the first model we consider a bond and a 
 convertible bond, and in the second model a stock and an American put 
 option on the stock. Although there is only one commodity and asset
 payoffs therefore do not depend on spot prices, we derive robust
 non-existence of equilibria in both cases. In the last example we 
 consider American call options with normal striking prices. We show 
 that in equilibrium the asstes can never span. The Arrow-Debreu 
 allocation cannot be implemented and the equilibrium is inefficient.
 This example is also robust.
Series: Sonderforschungsbereich 303, University of Bonn, Germany

Length: 
Creation-Date: 1990-04
Revision-Date: 
Handle: RePEc:bon:bonsfa:286