ULME Forschungsseminare:

Am Donnerstag, den 06.02.2025 trägt Prof. Frank Riedel (Universität Bielefeld) um 16:15 Uhr im Rahmen der ULME Forschungsseminare vor. Sein Thema lautet: “Excessive Trade in Financial Markets due to Heterogeneous Beliefs - and how to deal with it". Prof. Riedel wird vorab für Gespräche zur Verfügung stehen und im Anschluß besteht die Möglichkeit Prof. Riedel zum Abendessen zu begleiten. Bei Interesse wenden Sie sich bitte an Fr. Prof. Dr. Sandra Ludwig (sandra.ludwig(at)uni-ulm.de). 

Abstract:

Abstract:  Heterogeneous beliefs among market participants can lead to questionable speculative trading that goes beyond any risk-sharing motives. We demonstrate that such unwarranted betting behavior in market equilibrium can be mitigated by introducing nonlinear pricing for ambiguous contracts, without compromising legitimate risk-hedging activities.  

While Arrow-Debreu equilibria generally fail to achieve belief-neutral efficiency, we establish a modified version of the first welfare theorem in which equilibria with nonlinear prices uphold belief-neutral efficiency. Moreover, we show that belief-neutral efficiency, as a regulatory criterion, can be ensured by introducing transaction costs.