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Pricing and optimality with default spreads

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  • Fajardo, José

Abstract

In this paper we study the asset pricing and individual optimality problem in a two period incomplete markets economy where default is allowed but there are utility penalties and collateral requirements.

Suggested Citation

  • Fajardo, José, 2009. "Pricing and optimality with default spreads," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 686-692, May.
    • Handle: RePEc:eee:quaeco:v:49:y:2009:i:2:p:686-692
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    References listed on IDEAS

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    1. Zame, William R, 1993. "Efficiency and the Role of Default When Security Markets Are Incomplete," American Economic Review, American Economic Association, vol. 83(5), pages 1142-1164, December.
    2. Orrillo, Jaime, 2005. "Collateral once again," Economics Letters, Elsevier, vol. 87(1), pages 27-33, April.
    3. Fajardo, Jose, 2005. "A note on arbitrage and exogenous collateral," Mathematical Social Sciences, Elsevier, vol. 50(3), pages 336-341, November.
    4. Felix Kubler & Karl Schmedders, 2003. "Stationary Equilibria in Asset-Pricing Models with Incomplete Markets and Collateral," Econometrica, Econometric Society, vol. 71(6), pages 1767-1793, November.
    5. Pradeep Dubey & John Geanakoplos & Martin Shubik, 2005. "Default and Punishment in General Equilibrium," Econometrica, Econometric Society, vol. 73(1), pages 1-37, January.
    6. Aloisio Araujo & Mário Rui Páscoa & Juan Pablo Torres-Martínez, 2002. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Econometrica, Econometric Society, vol. 70(4), pages 1613-1638, July.
    7. Araujo, Aloisio & Fajardo, Jose & Pascoa, Mario R., 2005. "Endogenous collateral," Journal of Mathematical Economics, Elsevier, vol. 41(4-5), pages 439-462, August.
    8. Pradeep Dubey & John Geanakoplos & Martin Shubik, 1988. "Default and Efficiency in a General Equilibrium Model with Incomplete Markets," Cowles Foundation Discussion Papers 879R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1989.
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    Cited by:

    1. José Fajardo, 2010. "Behavioral arbitrage with collateral and uncertain deliveries," Annals of Finance, Springer, vol. 6(2), pages 241-254, March.

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