More Hedging Instruments may destablize Markets

Arbeitspapier

This paper formalizes the idea that more hedging instruments may destabilize markets when traders are heterogeneous and adapt their behavior according to experience based reinforcement learning. We investigate three different economic settings, a simple mean-variance asset pricing model, a general equilibrium two-period overlapping generations model with heterogeneous expectations and a noisy rational expectations asset pricing model with heterogeneous information signals. In each setting the introduction of additional Arrow securities can destabilize the market, causing a bifurcation of the steady state to multiple steady states, periodic orbits or even chaotic fluctuations.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Tinbergen Institute Discussion Paper ; No. 06-080/1

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Incomplete Markets ; General Equilibrium and Disequilibrium: Financial Markets ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Expectations; Speculations ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Thema: Asset pricing ; hedging ; reinforcement learning ; nonlinear dynamics ; bifurcations

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Brock, William ; Hommes, Cars ; Wagener, Florian
• Ereignis: Veröffentlichung
• (wer): Tinbergen Institute
• (wo): Amsterdam and Rotterdam
• (wann): 2006

Weitere Informationen

• Handle: http://hdl.handle.net/10419/86491
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ