Article (Journal/Review)
Trading constraints penalizing default: a recursive approach
Fecha
2008-01-20Registro en:
1745-0101 / 1745-011X
10.1016/j.jmateco.2006.10.003
000252196400006
Social, Inct/J-8669-2013
Autor
Braido, Luís Henrique Bertolino
Institución
Resumen
This paper proves existence of an ergodic Markov equilibrium for a class of general equilibrium economies with infinite horizon, incomplete markets, and default. Agents may choose to deny their liabilities and face trading constraints that depend on the adjusted amount of past default on each asset. These constraints replace the usual utility penalties and explore intertemporal tie-ins that appear in dynamic economies. The equilibrium prices and solvency rates present stationary properties that are usually required in econometric models of credit risk. (C) 2006 Elsevier B.V. All rights reserved.