Overview
- Authors:
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Thorsten Hens
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University of Zurich, Switzerland
Norwegian Business School, Norway
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Beate Pilgrim
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Reuters AG, Frankfurt, Germany
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About this book
The purpose of this book is to give a sound economic foundation of finance. Finance is a coherent branch of applied economics that is designed to understand financial markets in order to give advice for practical financial decisions. This book argues that for a sound economic foundation of finance the famous general equilibrium model which in its modern form emphasizes the incompleteness of financial markets is well suited. The aim of the book is to demonstrate that financial markets can be meaningfully embedded into a more general system of markets including, for example, commodity markets. The interaction of these markets can be described via the well known notion of a competitive equilibrium. We argue that for a sound foundation this competitive equilibrium should be unique. In a first step we demonstrate that this essential goal cannot of be achieved based only on the rationality principle, i. e. on the assumption utility maximization of some utility function subject to the budget constraint. In particular we show that this important lack of structure is disturbing as well for the case of mean-variance utility functions which are the basis of the Capital Asset Pricing Model, one of the cornerstones of finance. The final goal of our book is to give reasonable restrictions on the agents' utility functions which lead to a well determined financial markets model.
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Table of contents (10 chapters)
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Front Matter
Pages i-xxvii
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The General Equilibrium Model with Incomplete Markets
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- Thorsten Hens, Beate Pilgrim
Pages 3-37
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- Thorsten Hens, Beate Pilgrim
Pages 39-59
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- Thorsten Hens, Beate Pilgrim
Pages 61-69
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- Thorsten Hens, Beate Pilgrim
Pages 71-78
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- Thorsten Hens, Beate Pilgrim
Pages 79-100
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- Thorsten Hens, Beate Pilgrim
Pages 101-211
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The Capital Asset Pricing Model
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Front Matter
Pages 213-213
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- Thorsten Hens, Beate Pilgrim
Pages 215-233
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- Thorsten Hens, Beate Pilgrim
Pages 235-243
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- Thorsten Hens, Beate Pilgrim
Pages 245-257
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- Thorsten Hens, Beate Pilgrim
Pages 259-270
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Back Matter
Pages 271-299
Authors and Affiliations
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University of Zurich, Switzerland
Thorsten Hens
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Norwegian Business School, Norway
Thorsten Hens
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Reuters AG, Frankfurt, Germany
Beate Pilgrim
About the authors
Thorsten Hens, Ph.D. University of Bonn, is professor for financial economics at the institute for empirical research in economics at the University of Zurich. He has held positions in Bielefeld, Paris and Stanford and is currently also an adjunct professor at the Finance Department of the Norwegian Business School, NHH, in Bergen. Beate Pilgrim, Ph.D. University of Bielefeld, is currently working for Reuters AG, Frankfurt.