The Department of Banking and Financial Management announces the upcoming seminar with
“Multi-Asset Noisy Rational Expectations Equilibrium with Contingent Claims”
Seminar Organizers: Assist. Prof. Michail Anthropelos, Prof. George Skiadopoulos
Supported by Piraeus Bank
|Abstract: We study a noisy rational expectations equilibrium in a multi-asset economy populated by informed and uninformed investors, and noise traders. The assets can include state contingent claims such as Arrow-Debreu securities, assets with only positive payoffs, options or other derivative securities. The probabilities of states depend on a shock, which is observed only by the informed investor. We provide conditions under which the informed investor’s asset demands contain information about the shock. These conditions imply that adding derivative securities in some widely studied economies with one risky asset does not reveal any additional information about the shock. We also show that introducing volatility derivatives in incomplete markets makes these markets effectively complete, that is, allows investors to achieve Pareto optimal asset allocations. We find asset prices in closed form in (effectively) complete markets.
Georgy Chabakauri is an Associate Professor of Finance at the London School of Economics. He holds a PhD in Finance from the London Business School (2009). His articles have been published in the Review of Financial Studies and the Journal of Monetary Economics. His main research interests include asset pricing, macro-finance, portfolio choice, and asymmetric information. More information can be found at his personal website at http://personal.lse.ac.uk/CHABAKAU/.