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General equilibrium with heterogeneous participants and discrete consumption times

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  • Vasicek, Oldrich Alfons

Abstract

The paper investigates the term structure of interest rates imposed by equilibrium in a production economy consisting of participants with heterogeneous preferences. Consumption is restricted to an arbitrary number of discrete times. The paper contains an exact solution to market equilibrium and provides an explicit constructive algorithm for determining the state price density process. The convergence of the algorithm is proven. Interest rates and their behavior are given as a function of economic variables.

Suggested Citation

  • Vasicek, Oldrich Alfons, 2013. "General equilibrium with heterogeneous participants and discrete consumption times," Journal of Financial Economics, Elsevier, vol. 108(3), pages 608-614.
    • Handle: RePEc:eee:jfinec:v:108:y:2013:i:3:p:608-614
    DOI: 10.1016/j.jfineco.2013.01.005
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    References listed on IDEAS

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    1. Vasicek, Oldrich Alfons, 2005. "The economics of interest rates," Journal of Financial Economics, Elsevier, vol. 76(2), pages 293-307, May.
    2. Long, John Jr., 1990. "The numeraire portfolio," Journal of Financial Economics, Elsevier, vol. 26(1), pages 29-69, July.
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    Cited by:

    1. Mondher Bellalah & Yaosheng Xu & Detao Zhang, 2019. "Intertemporal optimal portfolio choice based on labor income within shadow costs of incomplete information and short sales," Annals of Operations Research, Springer, vol. 281(1), pages 397-422, October.
    2. Taiga Saito & Akihiko Takahashi, 2025. "A multi-agent equilibrium model in an incomplete market with discrete dividends: Applications to long-term discount curves," CARF F-Series CARF-F-599, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Jan 2026.
    3. Bellalah, Mondher & Zhang, Detao, 2017. "A model for international capital markets closure in an economy with incomplete markets and short sales," Economic Modelling, Elsevier, vol. 67(C), pages 316-324.
    4. Ruan, Xinfeng & Zhu, Wenli & Huang, Jiexiang & Zhang, Jin E., 2016. "Equilibrium asset pricing under the Lévy process with stochastic volatility and moment risk premiums," Economic Modelling, Elsevier, vol. 54(C), pages 326-338.
    5. Mondher Bellalah & Detao Zhang, 2019. "An intertemporal capital asset pricing model under incomplete information and short sales," Annals of Operations Research, Springer, vol. 281(1), pages 143-159, October.
    6. Mondher Bellalah & Xu Guo & Shuo Wu & Detao Zhang, 2022. "General equilibrium with heterogeneous participants and continuous consumption with information costs and short selling constraints," Annals of Operations Research, Springer, vol. 313(2), pages 713-732, June.
    7. Jin E. Zhang & Eric C. Chang & Huimin Zhao, 2020. "Market Excess Returns, Variance and the Third Cumulant," International Review of Finance, International Review of Finance Ltd., vol. 20(3), pages 605-637, September.
    8. Duan, Jin-Chuan, 2016. "Local-momentum autoregression and the modeling of interest rate term structure," Journal of Econometrics, Elsevier, vol. 194(2), pages 349-359.
    9. Galindo Gil, Hamilton, 2025. "How to build and solve continuous-time heterogeneous agents models in asset pricing? The martingale approach and the finite difference method," Journal of Mathematical Economics, Elsevier, vol. 116(C).
    10. Taiga Saito & Akihiko Takahashi, 2025. "A Multi-Agent Equilibrium Model in an Incomplete Market with Discrete Dividends: Applications to Long-Term Discount Curves," CIRJE F-Series CIRJE-F-1241, CIRJE, Faculty of Economics, University of Tokyo.
    11. Ruan, Xinfeng & Zhang, Jin E., 2018. "Equilibrium variance risk premium in a cost-free production economy," Journal of Economic Dynamics and Control, Elsevier, vol. 96(C), pages 42-60.

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    Keywords

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    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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