In this talk, I will present an incomplete equilibrium model to determine the price of an annuity. A finite number of agents receive stochastic income streams and choose between consumption and investment in the traded annuity. The novelty of this model is its ability to handle running consumption and general income streams. In particular, the model incorporates mean reverting income, which is empirically relevant but historically too intractable in equilibrium. The model is set in a Brownian framework, and equilibrium is characterized and proven to exist using a system of fully coupled quadratic BSDEs. This work is joint with Gordan Zitkovic.
Bio: Kim Weston is an assistant professor of mathematics at Rutgers University. She graduated from Carnegie Mellon University in 2016 under the supervision of Dmitry Kramkov. Previously, Kim held NSF postdoc positions at the University of Texas at Austin and Rutgers University. She is interested in mathematical finance and stochastic analysis, particularly, the mathematical underpinnings of financial equilibria.