Options, Sunspots, and the Creation of Uncertainty
Bibliographic Data
| ID | 10171092 |
|---|---|
| Authors | David Bowman (0000-0002-2064-7624, Federal Reserve), Jon Faust (Federal Reserve) |
| Year | 1997 |
| Volume | 105 |
| Issue | 5 |
| Pages | 957-975 |
| Publication date | 1997-10-01 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/262100 |
| OpenAlex | W2050241981 |
| Language | EN |
| Citations received | 4 |
| References cited | 2 |
The authors present two examples in which the addition of an option market leads to sunspot equilibria despite the fact that no sunspot equilibria exist without the market. These examples highlight limitations in two prevalent views of option markets. It is often assumed that option markets help complete otherwise incomplete markets. The authors demonstrate that they can instead increase the number of events agents wish to insure against. As in Fischer Black and Myron Scholes (1973), it is often assumed that option markets are redundant. The authors demonstrate that an option market may not be redundant even when markets were complete before its introduction. Copyright 1997 by the University of Chicago
Black–Scholes model · Economics · Financial economics · Incomplete markets · Microeconomics · Physics · Sunspot · Economic theories and models · Financial Markets and Investment Strategies · Stochastic processes and financial applications
| Unique citing works | 4 |
|---|---|
| Citations per year | 0,17 |
| Citation span | 2002 - 2019 (18) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 4 |