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In our previous paper we built a general equilibrium model of default and punishment in which equilibrium always exists and endogenously determines asset promises, penalties, and sales constraints. In this paper we interpret the endogenous sales constraints as equilibrium signals. By...
Persistent link: https://www.econbiz.de/10005463898
We extend the standard model of general equilibrium with incomplete markets to allow for default and punishment by thinking of assets as pools. The equilibrating variables include expected delivery rates, along with the usual prices of assets and commodities. By reinterpreting the variables, our...
Persistent link: https://www.econbiz.de/10005463908
in equilibrium. A formal definition of liquidity is presented. When new information raises the probability a fixed income … information also shortens the horizon over which the asset might default, its price falls still further because the margin …
Persistent link: https://www.econbiz.de/10004990661
We build a model of competitive pooling, which incorporates adverse selection and signalling into general equilibrium. Pools are characterized by their quantity limits on contributions. Households signal their reliability by choosing which pool to join. In equilibrium, pools with lower quantity...
Persistent link: https://www.econbiz.de/10004990814
exists, even with exclusivity constraints on asset sales, and transactions-liquidity costs or information-evaluation costs …
Persistent link: https://www.econbiz.de/10005087374
liquidity crises in equilibrium. A formal definition of liquidity is presented. When new information raises the probability and …
Persistent link: https://www.econbiz.de/10005593327
We build a model of competitive pooling, which incorporates adverse selection and signalling into general equilibrium. Pools are characterized by their quantity limits on contributions. Households signal their reliability by choosing which pool to join. In equilibrium, pools with lower quantity...
Persistent link: https://www.econbiz.de/10005593561
We build a model of competitive pooling and show how insurance contracts emerge in equilibrium, designed by the invisible hand of perfect competition. When pools are exclusive, we obtain a unique separating equilibrium. When pools are not exclusive but seniority is recognized, we obtain a...
Persistent link: https://www.econbiz.de/10005593621
bounds for both covariances and correlations and show how such bounds can be tightened using information beyond the …
Persistent link: https://www.econbiz.de/10005463944
is a random variable. Apart from regularity assumptions, there are two crucial conditions: (i) low information -- agents …
Persistent link: https://www.econbiz.de/10005087407