search query: @author Stapleton, R. C. / total: 12
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| Author: | Franke, G. Stapleton, R. C. Subrahmanyam, M. G. |
| Title: | Who buys and who sells options: The role of options in an economy with background risk |
| Journal: | Journal of Economic Theory
1998 : SEP, VOL. 82:1, p. 89-109 |
| Index terms: | ECONOMIC THEORY EQUILIBRIUM THEORY |
| Language: | eng |
| Abstract: | In the paper, an equilibrium is derived in which some investors buy call / put options on the market portfolio while others sell them. Since investors are assumed to have similar risk-averse preferences, the demand for these contracts is not explained by differences in the shape of utility functions. It is shown that investors with low or no background risk have a concave sharing rule, i. e. they sell options on the market portfolio, whereas investors with high background risk have a convex sharing rule and buy these options. |
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