Incomplete markets over an infinite horizon: long-lived securities and speculative bubbles

Article Abstract:

Sequence economies over an infinite horizon with general security structures are analyzed. It is assumed that there is a pseudo-equilibrium for all economies and that there is an equilibrium for a dense set of economies. Hence, the indebtedness of the agents in equilibrium can be constrained either through an explicit bound on their debts or by a transversality condition restricting the asymptotic growth of their debts. The prices of infinite-lived securities in zero net supply are found to allow speculative bubbles and these can alter the equilibrium allocation.

Speculation, Securities

---

Debt constraints and equilibrium in infinite horizon economies with incomplete markets

Article Abstract:

A concept of an equilibrium and a pseudo-equilibrium for infinite horizon economies with incomplete asset markets is presented. This notion generalizes the conventional ones for finite horizon economies with incomplete markets and for infinite horizon economies with complete markets. There exists a pseudo-equilibrium when assets are short-lived and denominated in general commodity bundles. A true equilibrium is attained when assets are denominated only in a single numeraire commodity or in units of account.

Research, Economic aspects, Debt, Commodities

---

The existence of security market equilibrium with a non-atomic state space

Article Abstract:

A finite horizon economy with incomplete markets is analyzed which at every period, a non-atomic continuum of states of nature exists. Backward recursion techniques are use in conjunction with a reformulation of the problem in terms of first-order conditions to determine the existence of a Radner equilibrium. Findings reveal that in any date and state the position attained after any possible previous asset trades constitutes a possible consumption even in the case of countable many states.

Similar abstracts:

• Abstracts: Discreteness of equilibria in incomplete markets with a continuum of states. The set of equilibria of first-price auctions
• Abstracts: A topological invariant for competitive markets. Limited arbitrage is necessary and sufficient for the existence of an equilibrium
• Abstracts: Properties of realized variance under alternative sampling schemes. Realized variance amd market microstructure noise
• Abstracts: Cooperation and effective computability. Evolutionary selection in normal-form games. Equilibrium refinement for infinite normal-form games
• Abstracts: Nonparametric estimation of triangular simultaneous equations models. Nonparametric estimation of exact consumers surplus and deadweight loss

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.