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THE BASIC MODEL
GENERALIZATION TO INCLUDE RISK NEUTRAL
THE DESIGN OF MULTIPLE CONTRACTS
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agent wants aggregate demand aggregate endowment aggregate trader assume become a market bounded functions chapter contract f contract ft+j contract innovation Cov(f denote discrimination Duffie and Jackson e)Cov(f economy eigenvalue problem eigenvector equation equilibrium event tree exactly one contract existence of forward expected utility hypothesis explicit formula extra contract feasible contract Financial Economics Financial Innovation fixed contract following proposition forward contract forward markets forward trading futures contract futures markets Futures Trading groups of traders hedger Hence incentive to become Jackson 37 Journal of Financial linear linear subspace market maker situation market structure matrix maximized utility maximum increase mean-variance monopolistic market maker normally distributed notation optimal contract design optimal price Pareto optimal positive definite Proof pt+j risk aversion coefficient risk neutral agents risk neutral trader RyCov(f set different prices simply strictly Pareto dominates Theory trade situation traders are risk utility function Var(d Var(f Var(h Var(x vector f