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How Does Asymmetric Information Create Market Incompleteness?

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Abstract

The aim of this work is to show that incompleteness is due in general not only to a lack of assets, but also to a lack of information. In this paper we present a simple influence model where the influencial agent has access to additional information. This leads to the construction of two models, a complete model and an incomplete model where the only difference is a difference of information. This leads to a simple model of incomplete market where the number of assets is not the cause of incompleteness: incomplete information is the explanation.

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Authors and Affiliations

  1. Université de Lyon, Université Lyon 1, ISFA, Laboratoire SAF, 50 avenue Tony Garnier, 69007, Lyon, France

    Anne Eyraud-Loisel

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  1. Anne Eyraud-Loisel
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Correspondence to Anne Eyraud-Loisel.

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Eyraud-Loisel, A. How Does Asymmetric Information Create Market Incompleteness?. Methodol Comput Appl Probab 21, 531–538 (2019). https://doi.org/10.1007/s11009-018-9672-x

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  • DOI: https://doi.org/10.1007/s11009-018-9672-x

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