This paper provides a non-linear pricing rule for the valuation of assets on financial markets with intermediaries.The non-linearity arises from the fact that dealers charge a price for their intermediation between buyer and seller. The pricing rule we propose is an alternative for the wellknown no-arbitrage pricing on markets without frictions.The price of an asset equals the signed Choquet integral of its discounted payo with respect to a concave signed capacity.We show that this pricing rule is consistent with equilibrium. Furthermore, equilibria are shown to satisfy a notion of constrained Pareto optimality.
|Place of Publication||Tilburg|
|Number of pages||15|
|Publication status||Published - 1996|
|Name||CentER Discussion Paper|