A martingale characterization of equilibrium asset price processes

Ali Lazrak (1) , J. P. Décamps

1 Sauder - Sauder School of Business [British Columbia]

Bick (1987,1990) and He and Leland (1993) demonstrated that not every arbitrage-free Markovian diffusion price process is consistent with an equilibrium approach. We propose a unified framework for these results and we derive a new martingale characterization of equilibrium.

Keywords: Markovian diffusion price process; Equilibrium; Partial differential equation; Martingale.; Martingale

Domains: Humanities and Social Sciences; Business administration

Ali Lazrak, J. P. Décamps. A martingale characterization of equilibrium asset price processes. Economic Theory, 2000, Vol.15, n°1, pp.207-213. ⟨hal-00485724⟩