Nontraded Assets in Incomplete Markets : Pricing and Portfolio Choice

• This paper examines portfolio choice and asset pricing when some assets are nontraded, for instance when a country cannot trade claims to its output on world capital markets, when a government cannot trade claims to future tax revenues, or when an individual cannot trade claims to his future wages. The close relation between portfolio choice and implicit pricing of nontraded assets is emphasized. Explicit solutions are presented to the portfolio and pricing problem for special cases, including when income from the nontraded assets is a diffusion process, not spanned by traded assets, and affected by state variable.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Nyckelord

portfolio choice

asset pricing

nontraded assets

labor income

optimal hedging

incomplete markets

spanning

continuous time

Economics

Nationalekonomi

Publikations- och innehållstyp

vet (ämneskategori)

rap (ämneskategori)