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Overview
The purpose of General Equilibrium Foundations of Finance is to give a sound economic foundation of finance based on the general equilibrium model with incomplete markets which embodies the famous CAPM as an important special case. This goal is achieved by giving reasonable restrictions on the agents' characteristics that lead to a well determined financial markets model having a unique competitive equilibrium. The innovation of this book is to transfer and to extend the theoretical results on the structure of competitive equilibria into the modern context of incomplete financial markets. General Equilibrium Foundations of Finance should be easily accessible by advanced Ph.D. students as well as by theorists of any subfield of mathematical economics. It should be interesting both for theorists who are looking for possible applications of rigorous theorizing as well as for practitioners who seek for a theoretical foundation of fruitful applications of financial markets' models.Synopsis
Using the general equilibrium model, financial markets can be analyzed and embedded into more general systems of markets, argue Hens (financial economics, U. of Zurich, Norway) and Pilgrim (Reuters AG, Germany). They look at mean-variance utility functions as the basis of the Capital Asset Pricing Model and explore how restrictions on agents' utility functions (as opposed to the rationality principle) can be considered the basis towards a well-determined financial markets model. They synthesize current research on these and other questions. Annotation (c)2003 Book News, Inc., Portland, OR