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Creator: Alvarez, Fernando, 1964- and Jermann, Urban J. Series: Endogenous incompleteness Abstract:
We study the asset pricing implications of a multi-agent endowment economy where agents can default on debt. We build on the environment studied by Kocherlakota (1995) and Kehoe and Levine (1993). We present an equilibrium concept for an economy with complete markets and with endogenous solvency constraints. These solvency constraints prevent default, but at the cost of reduced risk sharing. We show that versions of the classical welfare theorems hold for this equilibrium definition. We characterize the pricing kernel, and compare it to the one for economies without participation constraints: interest rates are lower and risk premia depend on the covariance of the idiosyncratic and aggregate shocks.
Palavra-chave: Equilibrium, Default, Solvency constraints, Risk, Shocks, and Assets Sujeito: G12 - General financial markets - Asset pricing ; Trading volume ; Bond interest rates and D50 - General equilibrium and disequilibrium - General
Creator: Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 347 Descrição:
The Harry G. Johnson Lecture, presented at the 1987 A.U.T.E. and the Royal Economic Society Conference, Aberyswyth, April 1-4.
Palavra-chave: Monetary theory, Inside money, Assets, Outside money, Equilibrium model, and Currency Sujeito: E40 - Money and Interest Rates: General and G12 - Asset Pricing; Trading Volume; Bond Interest Rates
Creator: Smith, Bruce D. (Bruce David), 1954-2002 and Stutzer, Michael J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 410 Palavra-chave: Farm Credit System, Assets, Dividends, Adverse selection, Risk, FCS, and Mutuals Sujeito: H81 - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts