We consider an infinite-horizon exchange economy with incomplete markets and collateral constraints. As in the two-period model of Geanakoplos and Zame (1998) households can default on their liabilities at any time without any utility penalties or loss of reputation. Financial securities are...

Many assets derive their value not only from future cash flows but also from their ability to serve as collateral. In this paper, we investigate this collateral value and its impact on asset returns in an infinite-horizon general equilibrium model with heterogeneous agents facing collateral...

We assess the quantitative implications of collateral re-use on leverage, volatility, and welfare within an infinite-horizon asset-pricing model with heterogeneous agents. In our model, the ability of agents to reuse frees up collateral that can be used to back more transactions. Re-use thus...

While equilibrium allocations in models with incomplete markets are generally not Pareto-efficient, it is often argued that quantitative welfare losses from missing assets are small when time-horizons are long and shocks are transitory. In this paper we use a computational analyses to show that...

The trading volume of long-lived securities with recursive payoffs, such as equity, is generically zero in infinite-horizon recursive pure exchange Lucas asset models with heterogeneous agents. In equilibrium, there is no portfolio rebalancing of such assets. More generally, the end-of-period...

This paper develops theoretical foundations for an error analysis of approximate equilibria in dynamic stochastic general equilibrium models with heterogeneous agents and incomplete financial markets. While there are several algorithms which compute prices and allocations for which agents' first...

In this paper we examine the quantitative effects of margin regulation on volatility in asset markets. We consider a general equilibrium infinite-horizon economy with heterogeneous agents and collateral constraints. There are two assets in the economy which can be used as collateral for...

This paper examines the two-fund separation paradigm in the context of an infinite-horizon general equilibrium model with dynamically complete markets and heterogeneous consumers with time- and state-separable utility functions. With the exception of the dynamic structure, we maintain the...

The purpose of this paper is to analyze endogenous asset innovation by an entrepreneurial exchange owner in a partial equilibrium model of incomplete security markets with financial transaction fees. A monopolistic market maker has the technology to introduce new securities into the economy and...