We study an economy where there are two types of assets. Consumers' promises are the primitive defaultable assets secured by collateral chosen by the consumers themselves. The purchase of these personalized assets by Â¯- nancial intermediaries is Â¯nanced by selling back derivatives to consumers. We show that nonarbitrage prices of primitive assets are strict submartin- gales, whereas nonarbitrage prices of derivatives are supermartingales. Next we establish existence of equilibrium, without imposing bounds on short sales. The nonconvexity of the budget set is overcome by considering a continuum of agents
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- Aloisio Araújo & Jaime Orrillo & Mario R. Páscoa, 2000. "Equilibrium with Default and Endogenous Collateral," Mathematical Finance, Wiley Blackwell, vol. 10(1), pages 1-21.
- Fajardo, Jose, 2005.
"A note on arbitrage and exogenous collateral,"
Mathematical Social Sciences,
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- Fajardo, J., 2004. "A Note On Arbitrage and Exogenus Collateral," Finance Lab Working Papers flwp_62, Finance Lab, Insper Instituto de Ensino e Pesquisa.
- Araujo, Aloisio & Fajardo, Jose & Pascoa, Mario R., 2005. "Endogenous collateral," Journal of Mathematical Economics, Elsevier, vol. 41(4-5), pages 439-462, August.
- Pascoa, Mario Rui & Araújo, Aloísio Pessoa de & Barbachan, José Santiago Fajardo, 2003. "Endogenous collateral," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 511, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Araujo, Aloisio. & Fajardo, J. & Páscoa. M. R., 2004. "Endogenous Collateral," Finance Lab Working Papers flwp_68, Finance Lab, Insper Instituto de Ensino e Pesquisa.
- MÃ¡rio PÃ¡scoa & Aloisio Araujo & JosÃ© Fajardo, 2004. "Endogenous Collateral," Econometric Society 2004 Latin American Meetings 161, Econometric Society.
- Mariano Steinert & Juan Pablo Torres-Martínez, 2004. "General equilibrium existence with asset-backed securitization," Textos para discussão 490, Department of Economics PUC-Rio (Brazil).
- 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.
- Pascoa, Mario Rui & Araújo, Aloísio Pessoa de & Torres-Martínez, Juan Pablo, 2001. "Collateral avoids Ponzi schemes in incomplete markets," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 419, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Elyégs Jouini & Hédi Kallal, 1995. "Arbitrage In Securities Markets With Short-Sales Constraints," Mathematical Finance, Wiley Blackwell, vol. 5(3), pages 197-232.
- John Geanakoplos & Pradeep Dubey, 1989. "Liquidity and Bankruptcy with Incomplete Markets: Pure Exchange," Cowles Foundation Discussion Papers 900, Cowles Foundation for Research in Economics, Yale University.
- Duffie, Darrell & Shafer, Wayne, 1985. "Equilibrium in incomplete markets: I : A basic model of generic existence," Journal of Mathematical Economics, Elsevier, vol. 14(3), pages 285-300, June.
- Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics,in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614 Elsevier.
- Donald A. Walker (ed.), 2000. "Equilibrium," Books, Edward Elgar Publishing, volume 0, number 1585. Full references (including those not matched with items on IDEAS)
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