International Asset Pricing with Risk-Sensitive Rare Events
AbstractWe propose a frictionless general equilibrium model in which two international consumers with recursive preferences trade two consumption goods and a complete set of date and state contingent securities. Consumption home bias and concern for the temporal distribution of risk generate rich dynamics for international prices and quantities. In our model, exchange rate movements are as volatile as they are in the data. Furthermore, both the volatility of the exchange rate movements and risk-premia are endogenously time varying and history dependent.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 176.
Date of creation: 2010
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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