RIEB Seminar
International Symposium on Incomplete Markets
International Symposium on Incomplete Markets
Jointly supported by RIEB Seminar / Rokko Theory Seminar / Rokko Forum
| Date & Time | Monday, June 27, 2022, 3:10pm - 5:20pm |
|---|---|
| Place | Hybrid (Face-to-face / Online Seminar by Zoom) |
| Intended Audience | Faculty, Graduate Students, and People with Equivalent Knowledge |
| Langage | English |
| Remarks | Please complete the registration before June 23. The seminar details will be sent to the registered emails. Registration Form (Due: June 23) |
3:10pm - 4:10pm
- Topic
- The Arbitrage Pricing Theory in Incomplete Markets
- Speaker
- Michael ZIERHUT (Institute of Financial Economics, Humboldt University)
- Abstract
- The arbitrage pricing theory (APT) is traditionally viewed as a descriptive theory: If asset prices are decomposed into systematic and idiosyncratic components, the latter are negligible for almost all assets in large markets. This paper analyzes its role as a predictive theory: When prices of systematic risk factors are estimated by means of linear regression, these estimates are a lower-dimensional representation of a pricing kernel. Such estimates can be used to predict arbitrage-free prices for new assets. Market structure matters: When markets are complete, there is a unique pricing kernel and factor pricing is always arbitrage-free. When markets are incomplete, this method may select a nonpositive pricing kernel. This leads to a problem that is robust in a topological sense: For an open set of arbitrage-free markets, estimated factor models do not assign arbitrage-free prices out of sample. The critical assumption is therefore not that markets grow large, but that markets grow complete.
4:20pm - 5:20pm
- Topic
- Third-Party Sale of Information
- Speaker
- In-Uck PARK (School of Economics, University of Bristol)
- Abstract
- We study design and pricing of information by a monopoly information provider for a buyer in a trading relationship with a seller. The profit-maximizing information structure has a binary threshold character. This structure is inefficient when seller production cost is low. Compared with a situation of no information, the information provider increases welfare if cost is high but reduces it if cost is low. A monopoly provider creates higher welfare than a competitive market in information if the prior distribution of buyer valuations is not too concentrated. Giving the seller a veto over the information contract generates full efficiency.