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Collateral Shortages, Asset Price And Investment Volatility With Heterogeneous Beliefs

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  • Dan Vu Cao

    (MIT)

Abstract

The recent economic crisis highlights the role of financial markets in allowing economic agents, including prominent banks, to speculate on the future returns of different financial assets, such as mortgage-backed securities. This paper introduces a dynamic general equilibrium model with aggregate shocks, potentially incomplete markets and heterogeneous agents to investigate this role of financial markets. In addition to their risk aversion and endowments, agents differ in their beliefs about the future aggregate states of the economy.

Suggested Citation

  • Dan Vu Cao, 2010. "Collateral Shortages, Asset Price And Investment Volatility With Heterogeneous Beliefs," 2010 Meeting Papers 1233, Society for Economic Dynamics.
  • Handle: RePEc:red:sed010:1233
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    References listed on IDEAS

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