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Questions tagged [complete-markets]

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4
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1answer
47 views

Probability of history occurring at time $t$

I am reading LS book "Recursive Macroeconomics Theory". In this book, as well as in some online lecture notes on the Internet. They often denote, for example, $\pi_t(s^t)$ for probability that ...
0
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1answer
22 views

LS book (Recursive Macro Theory). Chapter8: Complete Market

I am reading LS book, on Chapter 8 - Complete Markets (3rd version). There is an example on page 264 that I am quite confused. I attach the picture of the example here under. I don't understand why ...
5
votes
1answer
93 views

How, with complete markets, do we have a representative agent?

I've read several texts stating that with a complete market assumption, there's always a representative agent lurking. How is it that by assuming complete markets, we're able to prove the existence of ...
3
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1answer
89 views
3
votes
1answer
49 views

Can we have incomplete markets with a continuum of securities?

Imagine there is a continuum of firms in the economy. Each draws its productivity from the same stochastic process. The stochastic process has unbounded support. The only securities in the economy are ...
15
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2answers
600 views

Complete Markets in Continuous Time

In the standard discrete time economies with a finite number of states, $n$, a complete markets economy is simply an economy with $n$ independent assets (Think Ljunqvist and Sargent Chapter 8). This ...