Computing equilibria in stochastic finance economies

Felix Kubler*, Karl H Schmedders

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

13 Scopus citations


We describe a homotopy algorithm for the computation of equilibria in Stochastic Finance Economies. The algorithm solves a nonlinear system of equations consisting of the first-order conditions of the agents' utility maximization problems and market-clearing conditions. Moreover, we discuss the use of a straightforward homotopy approach for local comparative statics. Using our methods we evaluate price, volatility, and welfare effects of options in incomplete asset markets.

Original languageEnglish (US)
Pages (from-to)145-172
Number of pages28
JournalComputational Economics
Issue number1-2
StatePublished - 2000


  • Homotopy algorithm
  • Incomplete markets
  • Index theorem
  • Stochastic finance economy

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)
  • Computer Science Applications


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