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Bankruptcies in Temporary Equilibrium Forward Markets With and Without Institutional Restrictions

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  • Dale O. Stahl II

Abstract

Sufficient conditions are found for the existence of an orderly sequence of temporary equilibria in economies with incomplete forward markets without exogenous limits on short-sales. In the absence of institutionally imposed trade restrictions, equilibrium exists under the assumption of overlapping expectations. In the institutional model a clearinghouse imposes rules of trade (interpreted as margin requirements) to reduce the likelihood of bankruptcies. Under this rule, equilibrium exists without overlapping expectations, and subsequent bankruptcies are less likely.

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  • Dale O. Stahl II, 1985. "Bankruptcies in Temporary Equilibrium Forward Markets With and Without Institutional Restrictions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(3), pages 459-471.
    • Handle: RePEc:oup:restud:v:52:y:1985:i:3:p:459-471.
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    File URL: http://hdl.handle.net/10.2307/2297664
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    Cited by:

    1. Fratini, Saverio M. & Levrero, Enrico Sergio & Ravagnani, Fabio, 2016. "Price expectations in neo-Walrasian equilibrium models: an overview," MPRA Paper 69515, University Library of Munich, Germany.
    2. Le Van, Cuong & Navrouzoglou, Paulina & Vailakis, Yiannis, 2019. "On endogenous formation of price expectations," Games and Economic Behavior, Elsevier, vol. 115(C), pages 436-458.

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