At arbitrary prices of commodities and assets, fix-price equilibria exist under weak assumptions: endowments need not satisfy an interiority condition, utility functions need only satisfy a very weak monotonicity requirement, and the asset return matrix allows for redundant assets. Prices of assets may permit arbitrage. At equilibrium, though restricted through endogenously determined trading c...

The paper analyses a simplified version of a Glosten-Milgrom style specialist security trading model with trade-timing. In a setting where traders are differentially informed, if the best-informed investors have a sufficiently strong or weak impact on prices then the investors with the strongest impact on prices delay their investment strategically, pretending to be the low-impact types. JEL Cl...

A discussion of the interrelations between food, health, and the environment is extremely topical today. Rising food prices together with the price of oil and a series of so-called "natural" catastrophes dominate the news every day. At the same time, there is a lot of confusion. Why are world food prices increasing so quickly and dramatically? Why is world hunger rising again after a long stead...

Theoretically and experimentally, we generalize the analysis of acquiring a company (Samuelson and Bazerman 1985) by allowing for competition of both, buyers and sellers. Näıvety of both is related to the idea that higher prices exclude worse qualities. While competition of näıve buyers increases prices, competition of näıve sellers promotes efficiency enhancing trade. Our predictions are teste...

This paper empirically determines why, during the 1990s, inflation in Canada was consistently more stable than predicted by the fixed-coefficients Phillips curve. A time-varying-coefficient model, where all the parameters adjust simultaneously, shows that the behaviour of expectations was probably a major contributing factor. A decrease in the value of the coefficient on the first difference of...

The Journal of Economic Literature codes classification system (JEL) published by the American Association (AEA) is de facto standard for research literature in economics. JEL used to classify articles, dissertations, books, book reviews, and working papers EconLit, a database maintained AEA. Over time, it has evolved extended with over 850 subclasses. This paper reviews history development sys...

For portfolio choice problems with proportional transaction costs, we discuss whether or not there exists a shadow price, i.e., a least favorable frictionless market extension leading to the same optimal strategy and utility. By means of an explicit counter-example, we show that shadow prices may fail to exist even in seemingly perfectly benign situations, i.e., for a log-investor trading in an...

This paper proposes a consistent approach to the pricing of weather derivatives. Since weather derivatives are traded in an incomplete market setting, standard hedging based pricing methods cannot be applied. The growth optimal portfolio, which is interpreted as a world stock index, is used as a benchmark or numeraire such that all benchmarked derivative price processes are martingales. No meas...

This paper demonstrates the usefulness and importance of the concept of honest times to financial modeling. It studies a financial market with asset prices that follow jump-diffusions with negative jumps. The central building block of the market model is its growth optimal portfolio (GOP), which maximizes the growth rate of strictly positive portfolios. Primary security account prices, when exp...

Abstract: How asset prices should be taken into account in monetary policy is a controversial question mainstream discussion. These positions can differentiated two broad perspectives: the proactive and reactive views. The view advocates pricking price bubble, while argues against targeting prices. In this article relation between Austrian business cycle theory examined. Following this, critiqu...