Endogenous Completeness of Diffusion Driven Equilibrium Markets

We study the existence of dynamic equilibria with endogenously complete markets incontinuous-time, heterogenous agents economies driven by diusion processes. Ourmain results show that under appropriate conditions on the transition density ofthe state variables, market completeness can be deduced from the primitives of theeconomy. In particular, we prove that a sufficient condition for market completenessis that the volatility of dividends be invertible and provide higher order conditionsthat apply when this condition fails as is the case in the presence of xed incomesecurities. In contrast to previous research, our formulation does not require thatsecurities pay terminal dividends and thus allows for both nite and innite horizoneconomies.[...]