New answers tagged general-equilibrium
5
...no-arbitrage models (such as Black-Scholes and HJM) are equivalent to
equilibrium models (such as CAPM or C-CAPM).
Short Answer Yes, for models where asset prices are assumed to be Ito semimartingales (where the martingale part is a Brownian integral), although a more general argument is needed than that suggested by the special cases typically ...
2
This is because of competition. If you would keep the quantity supplied low someone else would produce as they can both earn profit and increase their market share by doing so.
This being said there are situations where producers actually keep the quantity limited so they can increase the price. We call this kind of situation collusion (or cartel).
However, ...
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