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| Author: | Christensen, P.O. Graversen, S.E. Miltersen, K.R. |
| Title: | Dynamic spanning in the consumption-based capital asset pricing model |
| Journal: | European Finance Review
2000 : VOL. 4:2, p. 129-156 |
| Index terms: | CAPITAL ASSET PRICING CONSUMPTION TRADING |
| Language: | eng |
| Abstract: | Under the assumption of the Consumption-based Capital Asset Pricing Model (CCAPM), Pareto optimal consumption allocations are characterized by each agent's consumption process being adapted to the filtration generated by the aggregate consumption process of the economy. In order to achieve Pareto optimal consumption allocations, a sufficiently varied set of assets must exist such that any wealth process adapted to this finer filtration can be implemented by dynamically trading in that set of assets. The authors provide sufficient conditions for the existence of such a set of assets based on dynamically trading contingent claims on aggregate consumption. |
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