Can anyone explain the connection between complete market and perfect risk sharing? I understand that in complete market, ex post consumption growth is equal for all investors. Why is that perfect risk sharing? The book also states that 


  only aggregate shocks should matter for risk prices. Any idiosyncratic risk will be equally shared.


Why is this case in complete market?
What does it have to do with financial innovation?
Idiosyncratic shocks are those for which each individual face a different shock – while there is no uncertainty in the aggregate. Aggregate shocks are those which affect all individuals within an economy. When you have complete markets –– those on which there are securities for each possible combinations of the idiosyncratic shocks –– individuals will trade to insure optimal levels of consumption across all possible states. So, to get the value of risky options one only need to look on aggregate shocks –– as ultimately these are the ones which will determine prices.