On Equilibrium Prices in Continuous Time

We combine general equilibrium theory and theorie generale of stochastic processes to derive structural results about equilibrium state prices

Constrained efficiency without commitment

We consider an infinite horizon economy where agents share income risks by trading a complete set of contingent claims but cannot commit to their promises. Allocations are restricted to be self-enforcing relative to autarchic reservation utilities. We provide a general characterization of constrained Pareto efficiency without assuming that there are uniform gains to trade. Our results extend those in Bloise and Reichlin (2011) in several aspects

On equilibrium prices in continuous time

We combine general equilibrium theory and théorie générale of stochastic processes to derive structural results about equilibrium state prices.general equilibrium, continuous time finance, théorie générale of stochastic processes, asset pricing, state prices

Endogenous Transaction Costs

The paper proposes an alternative general equilibrium formulation of financial asset economies with transactions costs. Transaction costs emerge endogenously at equilibrium and reflect agents decisions of intermediating financial activities at the expense of providing labor services. An equilibrium is shown to exist in the case of real asset structures.Competitive equilibrium, Incomplete markets, Endogenous transaction costs.

Asset market equilibrium with short-selling and differential information

We introduce differential information in the asset market model studied by Cheng (1991), Dana and Le Van (1996) and Le Van and Truong Xuan (2001). An equilibrium existence result is proven assuming that the economy's information structure satisfies the conditional independency property.Asset market, differential information, competitive equilibrium

Endogenous debt constraints in collateralized economies with default penalties

Preprint submitted to Journal of Mathematical Economics. Final version to be published by ElsevierThe objective of the paper is to propose endogenous debt constraints that rule out Ponzi schemes and ensure existence of equilibria in a model with limited commitment and (possible) default. We appropriately modify the definition of finitely effective debt constraints, introduced by Levine and Zame (1996) (see also Levine and Zame (2002)), to encompass models with limited commitment, default penalties and collateral. Along this line, we introduce in the setting of Araujo, Pascoa and Torres-Martınez (2002), Kubler and Schmedders (2003) and Pascoa and Seghir (2009) the concept of actions with finite equivalent payoffs. We show that, independently of the level of default penalties, restricting plans to have finite equivalent payoffs rules out Ponzi schemes and guarantees the existence of an equilibrium that is compatible with the minimal ability to borrow and lend that we expect in our model. An interesting feature of our debt constraints is that they give rise to budget sets that coincide with the standard budget sets of economies having a collateral structure but no penalties (as defined in Araujo, Pascoa and Torres-Martinez (2002)). This illustrates the hidden relation between finitely effective debt constraints and collateral requirements

Harsh default penalties lead to Ponzi schemes: a counterexample

Preprint dated October 12, 2011. Final version published by Elsevier; available online at http://www.sciencedirect.com/Pascoa and Seghir (2009) presented two examples to show that in the presence of utility penalties for default, collateral requirements do not always eliminate the occurrence of Ponzi schemes and equilibria may fail to exist. We provide a counterexample to their claim by showing that no trade is a competitive equilibrium in the examples they consider

Endogenous debt constraints in collateralized economies with default penalties

a b s t r a c t The objective of the paper is to propose endogenous debt constraints that rule out Ponzi schemes and ensure the existence of equilibria in a model with limited commitment and (possible) default. We appropriately modify the definition of finitely effective debt constraints, introduced by An interesting feature of our debt constraints is that they give rise to budget sets that coincide with the standard budget sets of economies having a collateral structure but no penalties (as defined i

On equilibrium prices in continuous time

Abstract We combine general equilibrium theory and théorie générale of stochastic processes to derive structural results about equilibrium state prices. JEL Classification: D51, D91, G10, G1