Asset pricing when risk sharing is limited by default:
We study the asset pricing implications of a multi-agent endowment economy where agents can default on contracts that would leave them otherwise worse off. We specialize and extend the environment studied by Kocherlakota (1995) and Kehoe and Levine (1993) to make it comparable to standard studies of...
Gespeichert in:
| Hauptverfasser: | , |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
Cambridge, Mass.
1998
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| Schriftenreihe: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
6476 |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Zusammenfassung: | We study the asset pricing implications of a multi-agent endowment economy where agents can default on contracts that would leave them otherwise worse off. We specialize and extend the environment studied by Kocherlakota (1995) and Kehoe and Levine (1993) to make it comparable to standard studies of asset pricing. We make contributions along two fronts. First, we extend the characterization of efficient allocations. Second, we present an equilibrium concept with complete markets and with endogenous solvency constraints. These solvency constraints are such as to prevent default at the cost of reduced risk sharing. We show a version of the classical welfare theorems 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 can be bigger depending on the covariance of the idiosyncratic and aggregate shocks. We show that those agents whose endowment is very similar to the aggregate endowment are irrelevant for asset pricing. In a quantitative example, for reasonable parameter values, the relevant marginal rates of substitution fall within the Hansen-Jagannathan bounds. |
| Beschreibung: | 68 S. graph. Darst. |
Internformat
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| 520 | |a We study the asset pricing implications of a multi-agent endowment economy where agents can default on contracts that would leave them otherwise worse off. We specialize and extend the environment studied by Kocherlakota (1995) and Kehoe and Levine (1993) to make it comparable to standard studies of asset pricing. We make contributions along two fronts. First, we extend the characterization of efficient allocations. Second, we present an equilibrium concept with complete markets and with endogenous solvency constraints. These solvency constraints are such as to prevent default at the cost of reduced risk sharing. We show a version of the classical welfare theorems 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 can be bigger depending on the covariance of the idiosyncratic and aggregate shocks. We show that those agents whose endowment is very similar to the aggregate endowment are irrelevant for asset pricing. In a quantitative example, for reasonable parameter values, the relevant marginal rates of substitution fall within the Hansen-Jagannathan bounds. | ||
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| id | DE-604.BV011956493 |
| illustrated | Illustrated |
| indexdate | 2024-07-09T18:19:08Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-008084339 |
| oclc_num | 39042294 |
| open_access_boolean | 1 |
| owner | DE-19 DE-BY-UBM DE-521 |
| owner_facet | DE-19 DE-BY-UBM DE-521 |
| physical | 68 S. graph. Darst. |
| publishDate | 1998 |
| publishDateSearch | 1998 |
| publishDateSort | 1998 |
| record_format | marc |
| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Alvarez, Fernando 1964- Verfasser (DE-588)12855178X aut Asset pricing when risk sharing is limited by default Fernando Alvarez ; Urban J. Jermann Cambridge, Mass. 1998 68 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 6476 We study the asset pricing implications of a multi-agent endowment economy where agents can default on contracts that would leave them otherwise worse off. We specialize and extend the environment studied by Kocherlakota (1995) and Kehoe and Levine (1993) to make it comparable to standard studies of asset pricing. We make contributions along two fronts. First, we extend the characterization of efficient allocations. Second, we present an equilibrium concept with complete markets and with endogenous solvency constraints. These solvency constraints are such as to prevent default at the cost of reduced risk sharing. We show a version of the classical welfare theorems 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 can be bigger depending on the covariance of the idiosyncratic and aggregate shocks. We show that those agents whose endowment is very similar to the aggregate endowment are irrelevant for asset pricing. In a quantitative example, for reasonable parameter values, the relevant marginal rates of substitution fall within the Hansen-Jagannathan bounds. Actif (comptabilité) - Prix - Modèles mathématiques ram Défaillance (finances) - Modèles mathématiques ram Risque - Modèles mathématiques ram Mathematisches Modell Assets (Accounting) Prices Mathematical models Default (Finance) Mathematical models Risk Mathematical models Jermann, Urban J. Verfasser (DE-588)129560782 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 6476 (DE-604)BV002801238 6476 http://papers.nber.org/papers/w6476.pdf kostenfrei Volltext |
| spellingShingle | Alvarez, Fernando 1964- Jermann, Urban J. Asset pricing when risk sharing is limited by default National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Actif (comptabilité) - Prix - Modèles mathématiques ram Défaillance (finances) - Modèles mathématiques ram Risque - Modèles mathématiques ram Mathematisches Modell Assets (Accounting) Prices Mathematical models Default (Finance) Mathematical models Risk Mathematical models |
| title | Asset pricing when risk sharing is limited by default |
| title_auth | Asset pricing when risk sharing is limited by default |
| title_exact_search | Asset pricing when risk sharing is limited by default |
| title_full | Asset pricing when risk sharing is limited by default Fernando Alvarez ; Urban J. Jermann |
| title_fullStr | Asset pricing when risk sharing is limited by default Fernando Alvarez ; Urban J. Jermann |
| title_full_unstemmed | Asset pricing when risk sharing is limited by default Fernando Alvarez ; Urban J. Jermann |
| title_short | Asset pricing when risk sharing is limited by default |
| title_sort | asset pricing when risk sharing is limited by default |
| topic | Actif (comptabilité) - Prix - Modèles mathématiques ram Défaillance (finances) - Modèles mathématiques ram Risque - Modèles mathématiques ram Mathematisches Modell Assets (Accounting) Prices Mathematical models Default (Finance) Mathematical models Risk Mathematical models |
| topic_facet | Actif (comptabilité) - Prix - Modèles mathématiques Défaillance (finances) - Modèles mathématiques Risque - Modèles mathématiques Mathematisches Modell Assets (Accounting) Prices Mathematical models Default (Finance) Mathematical models Risk Mathematical models |
| url | http://papers.nber.org/papers/w6476.pdf |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT alvarezfernando assetpricingwhenrisksharingislimitedbydefault AT jermannurbanj assetpricingwhenrisksharingislimitedbydefault |