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Incomplete markets, continuum of states and default

Author

Listed:
  • A. Araujo

    (Instituto de Matemática Pura e Aplicada and EPGE/FGV-RJ, Estrada Dona Castorina 110, 22460-320 Rio de Janeiro, RJ BRAZIL)

  • M. R. Páscoa

    (Faculdade de Economia, Universidade Nova de Lisboa, Travessa Estevão Pinto, 1070 Lisboa, PORTUGAL)

  • P. K. Monteiro

    (Instituto de Matemática Pura e Aplicada, Estrada Dona Castorina 110, 22460-320 Rio de Janeiro, RJ BRAZIL)

Abstract

We show that when bankruptcy, subject to penalties, is allowed, it is possible to prove the existence of equilibrium in a model with a continuum of states without imposing any assumptions on ex-post endowments.

Suggested Citation

  • A. Araujo & M. R. Páscoa & P. K. Monteiro, 1997. "Incomplete markets, continuum of states and default," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(1), pages 205-213.
    • Handle: RePEc:spr:joecth:v:11:y:1997:i:1:p:205-213
    Note: Received: November 20, 1995; revised version: September 16, 1996
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    Cited by:

    1. Jürgen Eichberger & Klaus Rheinberger & Martin Summer, 2014. "Credit risk in general equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 57(2), pages 407-435, October.
    2. Martins-da-Rocha, V. Filipe & Vailakis, Yiannis, 2012. "Endogenous debt constraints in collateralized economies with default penalties," Journal of Mathematical Economics, Elsevier, vol. 48(1), pages 1-13.
    3. Aloisio Araujo, 2002. "As Leis de Falência: uma Abordagem Econômica," Working Papers Series 57, Central Bank of Brazil, Research Department.
    4. Martins-da-Rocha, Victor Filipe & Vailakis, Yiannis, 2008. "Collateral, default penalties and almost finite-time solvency," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 670, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    5. Abdelkrim Seghir, 2006. "An overlapping generations model with non-ordered preferences and numeraire-incomplete markets," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 28(2), pages 95-112, February.
    6. Xavier Mateos-Planas & Giulio Seccia, 2013. "Consumer Default with Complete Markets: Default-based Pricing and Finite Punishment," Working Papers 711, Queen Mary University of London, School of Economics and Finance.
    7. Araújo, Aloísio Pessoa de & Funchal, Bruno, 2006. "How much debtors' punishment?," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 615, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    8. Florenzano, Monique & Gourdel, Pascal & Pascoa, Mario Rui, 2001. "Overlapping generations models with incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 36(3), pages 201-218, December.
    9. Weerachart Kilenthong, 2011. "Collateral premia and risk sharing under limited commitment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 46(3), pages 475-501, April.
    10. Nuno Gouveia, 2004. "General equilibrium with asymmetric information and default penalties," Cahiers de la Maison des Sciences Economiques b05051, Université Panthéon-Sorbonne (Paris 1), revised Jan 2005.
    11. Nuno Gouveia, 2005. "General equilibrium with asymmetric information and default penalties," Post-Print halshs-00195526, HAL.
    12. Orrillo, Jaime, 2001. "Default and exogenous collateral in incomplete markets with a continuum of states," Journal of Mathematical Economics, Elsevier, vol. 35(1), pages 151-165, February.
    13. Rubén Poblete-Cazenave & Juan Torres-Martínez, 2013. "Equilibrium with limited-recourse collateralized loans," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(1), pages 181-211, May.
    14. Laura Angeloni & Bernard Cornet, 2005. "Existence Of Financial Equilibria In A Multiperiod Stochastic Economy," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200506, University of Kansas, Department of Economics, revised Feb 2005.
    15. Monteiro, Paulo Klinger & Pascoa, Mario R., 2000. "Discreteness of equilibria in incomplete markets with a continuum of states," Journal of Mathematical Economics, Elsevier, vol. 33(2), pages 229-237, March.
    16. León-Ledesma, Miguel & Orrillo, Jaime, 2021. "Production, bankruptcy, and financial policies under collateral constraints," Mathematical Social Sciences, Elsevier, vol. 112(C), pages 109-119.
    17. Pascoa, Mario Rui & Araújo, Aloísio Pessoa de & Barbachan, José Santiago Fajardo, 2001. "Endogenous collateral: arbitrage and equilibrium without bounded short sales," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 418, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).

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