Off-campus UMass Amherst users: To download dissertations, please use the following link to log into our proxy server with your UMass Amherst user name and password.
Non-UMass Amherst users, please click the view more button below to purchase a copy of this dissertation from Proquest.
(Some titles may also be available free of charge in our Open Access Dissertation Collection, so please check there first.)
Formulation and computation of general financial equilibrium: A variational inequality approach
Abstract
In this dissertation, we discuss various general financial equilibrium problems, for which we present formulations and computational methods. In particular, we introduce financial equilibrium models with quadratic utility functions and general utility functions, with policy interventions in the form of taxes and price controls, and also with transaction costs. Equilibrium conditions are derived for each model, and qualitative analysis of each model, as well as the computational procedures and the convergence results, are studied using the theory of variational inequalities. A variety of numerical results to illustrate the performance of the algorithms is also provided. This dissertation relaxes several conventional assumptions used in deriving the capital asset pricing model. For example, it relaxes the assumption of homogeneous expectations, the assumption of the existence of a riskfree asset, and the assumption of perfect markets which assumes that there are no transaction costs and taxes, etc. We consider an economy in which there are multiple sectors, each of which can hold the multiple financial instruments as assets and/or liabilities. Each sector has his own utility function and his own beliefs about the future. The framework in this dissertation is one of competitive financial equilibrium, in which portfolio optimization is the behavioral assumption underlying each sector in the economy. The instrument prices serve as the market signals reflecting the economic market condition. The solution of the models yields the equilibrium instrument asset and liability volumes, as well as the equilibrium prices. Such problems are inherently complex and large-scale and, hence, present challenges from both modeling and mathematical programming perspectives. The framework which we introduce here is theoretical, although the foundations are empirical and based on the flow of funds accounts that provide a financial snapshot of an economy, and, in the case of the United States, are maintained by the Federal Reserve Board. In this dissertation, hence, we also balance the flow of funds data from the Federal Reserve Board for 1982 to 1991 and create the base-line for the general equilibrium models. We conclude this dissertation with possible extensions of the framework developed here and provide suggestions for future research.
Subject Area
Business community|Finance|Operations research
Recommended Citation
Dong, June Qiong, "Formulation and computation of general financial equilibrium: A variational inequality approach" (1994). Doctoral Dissertations Available from Proquest. AAI9510462.
https://scholarworks.umass.edu/dissertations/AAI9510462