Version anglaise

 

 

Cours du QEM2 et Master2 ETE

 

 

Semestre 2

 

 

Crédit ECTS: 3 ECTS

 

 

Enseignants:: B. Cornet

 

 

Evaluation: Examen final

 

 

Présentation:

 

 

This course presents the modern theory of financial markets in a general equilibrium model with

time and uncertainty. This approach is essential for understanding the role that financial markets play in a modern economy, how they achieve risk sharing and coordination of decisions and how new information changes the course of prices over time.

 

 

This course will first present the standard theory (model with a full set of contingent markets, the equivalent model with Arrow securities, the arbitrage-free condition and its implication on asset pricing, the equivalent martingale measure ) and will analyze how this modification of the market structure changes the fundamental predictions of general equilibrium theory: existence and efficiency of competitive equilibria.

 

 

It will outline how the field of finance, including such celebrated results as the CAPM, the martingale asset pricing theory, and the Modigliani Miller theorem, can be incorporated into the standard general equilibrium framework. This achievement was made possible by modifying the complete contracts market structure of the general equilibrium model towards a more realistic market structure of reopening spot markets across which income can be transferred using an incomplete system of financial markets.

Finally, it will present various topics of current research including: Firms behaviour in Financial equilibria with production, asymmetric information, restricted participation, default

 

 

Content:

 

1. Time and uncertainty : finite and infite horizon, continuous and discrete time

2. Walras equilibria with contingent commodities and Arrow securities

3. Financial asset structures and financial equilibria

4. Absence of arbitrage opportunities and its characterization

5. Completeness and incompleteness of the markets

6. Two period security pricing and the CAPM

7. Existence and optimality properties of financial equilibria

8. Arbitrage and Price Revelation with Asymmetric Information

9. Restricted participation and financial innovation

10. Firm behaviours in Financial equilibria with production

11. Default risk and financial equilibria

 

 

Bibliographie:

• M. Magill and M. Quinzii, “Theory of Incomplete Markets”, The MIT Press, 1996. Chapters 1-5.
• B. Cornet, “Equilibrium Theory with Commodities and Financial Markets”, Unpublished Notes.
• B. Cornet and L. De Boisdeffre, Arbitrage and Price Revelation with Asymmetric Information and Incomplete Markets, Journal of Mathematical Economics,38 (2002) 393-410.