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Asset Pricing in Models with incomplete markets and default

Author

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  • Karl Schmedders, Felix Kubler

Abstract

We consider an infinite horizon exchange economy with incomplete markets and default. As in Geanakoplos and Zame (1998) financial securities are traded if the promises associated with them are backed by collateral. The only collateral available in our economy are shares of Lucas trees. We prove that equilibria always exist and develeop an algorithm to approximate them numerically

Suggested Citation

  • Karl Schmedders, Felix Kubler, 2001. "Asset Pricing in Models with incomplete markets and default," Computing in Economics and Finance 2001 58, Society for Computational Economics.
  • Handle: RePEc:sce:scecf1:58
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    Cited by:

    1. Gaël Giraud, 2010. "Financial crashes versus liquidity trap : the dilemma of monetary policy," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00657047, HAL.
    2. Gaël Giraud, 2010. "Financial Crashes versus liquidity trap: the dilemma of monetary policy," Documents de travail du Centre d'Economie de la Sorbonne 10014, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    3. Adrian Peralta-Alva & Manuel S. Santos, 2012. "Analysis of numerical errors," Working Papers 2012-062, Federal Reserve Bank of St. Louis.
    4. Miguel A. Iraola & Juan Pablo Torres-Martínez, 2012. "Liquidity Contractions and Prepayment Risk on Collateralized Asset Markets," Working Papers wp364, University of Chile, Department of Economics.
    5. Manuel S. Santos & Adrian Peralta-Alva, 2012. "Ergodic Invariant Distributions for Non-optimal Dynamic Economics," Working Papers 2012-5, University of Miami, Department of Economics.

    More about this item

    Keywords

    incomplete markets; collateral; asset pricing;

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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