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Asset Pricing in Models with incomplete markets and default

Author

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  • Karl Schmedders, Felix Kubler

Abstract

We consider an infinite horizon exchange economy with incomplete markets and default. As in Geanakoplos and Zame (1998) financial securities are traded if the promises associated with them are backed by collateral. The only collateral available in our economy are shares of Lucas trees. We prove that equilibria always exist and develeop an algorithm to approximate them numerically

Suggested Citation

  • Karl Schmedders, Felix Kubler, 2001. "Asset Pricing in Models with incomplete markets and default," Computing in Economics and Finance 2001 58, Society for Computational Economics.
    • Handle: RePEc:sce:scecf1:58
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    Citations

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    Cited by:

    1. YiLi Chien & Hanno Lustig, 2010. "The Market Price of Aggregate Risk and the Wealth Distribution," The Review of Financial Studies, Society for Financial Studies, vol. 23(4), pages 1596-1650, April.
    2. Gaël Giraud, 2010. "Financial crashes versus liquidity trap : the dilemma of monetary policy," Post-Print halshs-00657047, HAL.
    3. repec:fgv:epgrbe:v:67:n:3:a:3 is not listed on IDEAS
    4. Manuel S. Santos & Adrian Peralta-Alva, 2012. "Analysis of Numerical Errors," Working Papers 2012-6, University of Miami, Department of Economics.
    5. Feijó, Ricardo Luis Chaves, 2013. "The General Equilibrium Framework with Default and Collateral," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 67(3), September.
    6. Manuel S. Santos & Adrian Peralta-Alva, 2012. "Ergodic Invariant Distributions for Non-optimal Dynamic Economics," Working Papers 2012-5, University of Miami, Department of Economics.
    7. Miguel A. Iraola & Juan Pablo Torres-Martínez, 2012. "Liquidity Contractions and Prepayment Risk on Collateralized Asset Markets," Working Papers wp364, University of Chile, Department of Economics.
    8. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.

    More about this item

    Keywords

    incomplete markets; collateral; asset pricing;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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