INSEAD Library

Doriot: for 2012-2013 courses

Includes bibliographical references and index

Digitized

Theory of Preface xiv lncomplete Markets 22 23 24 Complete and lncomplete Markets 231 No-arbitrage Equilibrium Example of Non-existence Existence and Optimality 239 248 254 1 Introduction 1 1 Main Themes 2 3 4 5 1 25 Bounded Rationality, Opportunism and Structure of Markets 10 Rational Expectations The Equilibrium Model 21 28 37 Exercises 275 Historical Remarks 277 Real and Financial Sectors of the Economy 5 Informational Efficiency of Security Prices Motivation and Summary 281 284 281 Two-Period Finance Economy Motivation and Summary 47 49 26 27 28 Conditional Expectation and Martingale Efficient Markets With Risk Aversion 47 53 65 Efficient Markets Under Risk Neutrality 298 305 6 7 8 9 10 12 Characteristics of the Finance Economy Contingent Market Equilibrium Financial Market Equilibrium Absence o f Arbitrage 69 82 103 Nearbitrage Equilibrium Exercises 321 Historical Remarks 324 6 Production In a Finance Economy Motivation and Summary 329 1 A Basic Property of lncomplete Markets 89 1 Constrained Pareto Optimality 114 132 13 Abstract Approach: Adjoint Equations Appendix Exercises 127 Historical Remarks 329 337 29 108 30 31 32 Characteristics of Production Economy 332 Sole Proprietorships Partnerships 356 Corporations 407 378 Appendix 3 Two-Period Security Pricing 137 Motivation and Summary 137 14 16 Inner Product, Differential and Gradient 151 161 179 Representative Agent Analysis 189 199 140 15 Valuation of Income Streams Exercises 413 Historical Remarks 421 7 Monetary Economy 33 34 35 36 37 427 427 431 449 439 465 Motivation and Summary 17 Capital Asset Pricing Model (CAPM) Appendix Exercises Real and Nominal Contracts Monetary Equilibrium Non-Neutrality of Monetary Policy Optimal Monetary Policy Indexing Contracts 476 Historical Remarks 206 4 Stochastic Finance Economy Motivation and Summary 211 18 20 211 215 220 222 Exercises 481 Historical Remarks 485 Event-tree Commodity Space Stochastic Financial Markets 228 19 Stochastic Exchange Economy 2 1 Absence of Arbitrage References 491 Index 517