Financial equilibria in the semimartingale setting: complete markets and markets with withdrawal constraints

TL;DR

This paper proves the existence of stochastic financial equilibria with semimartingale asset prices under broad conditions, covering complete markets and markets with withdrawal constraints, with novel insights into semimartingale functions.

Contribution

It introduces a general framework for establishing the existence of financial equilibria in complex market settings with jumps and time-dependent utilities, including a new characterization of semimartingale functions.

Findings

Existence of equilibria in markets with jumps and withdrawal constraints.

A novel characterization of semimartingale functions.

Applicability to markets with general time-dependent utilities.

Abstract

Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal constraints.We deal with random endowment density streams which admit jumps and general time-dependent utility functions on which only regularity conditions are imposed. As an integral part of the proof of the main result, we establish a novel characterization of semimartingale functions.