Research output: Working paper
Research output: Working paper
}
TY - UNPB
T1 - The role of options in an economy with background risk: a note
AU - Huang, J
PY - 2002
Y1 - 2002
N2 - This note presents three results closely related to Franke, Stapleton and Subrahmanyams work (11) on the role of options in an economy with non-hedgeable background risk. It first shows two necessary conditions for the existence of equilibrium when negative terminal wealth is non allowed. It then shows the impact on investors cautiousness of background risk and gives a simple proof of one main result in their work. Thirdly, it shows how investors construct their optimal sharing rules using call options.
AB - This note presents three results closely related to Franke, Stapleton and Subrahmanyams work (11) on the role of options in an economy with non-hedgeable background risk. It first shows two necessary conditions for the existence of equilibrium when negative terminal wealth is non allowed. It then shows the impact on investors cautiousness of background risk and gives a simple proof of one main result in their work. Thirdly, it shows how investors construct their optimal sharing rules using call options.
M3 - Working paper
T3 - Accounting and Finance Working Paper Series
BT - The role of options in an economy with background risk: a note
PB - The Department of Accounting and Finance
CY - Lancaster University
ER -