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Another Proof of the Existence of GEI Equilibrium with Default and Exogenous Collateral

Brazilian Review of Econometrics

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Title Another Proof of the Existence of GEI Equilibrium with Default and Exogenous Collateral
Another Proof of the Existence of GEI Equilibrium with Default and Exogenous Collateral
 
Creator Orrilo, Jaime; Professor of Mathematics and Economics at Catholic University of Brasilia, SGAN 916- Mo ́dulo B, 70790-000, Asa Norte, Brasília – DF
 
Description The existence of equilibria in a GEI model with default where short sales are backed by collateral (henceforth: exogenous collateral economy), has been demonstrated by Geanakoplos and Zame in a 2002 version of their paper (“Collateral, Default and Market Crashes”). On the other hand, Araújo et al. (2005) have recently provided a character- ization, via non arbitrage, of prices of defaultable assets backed by collateral. The aim of this paper is to provide an alternative proof of the existence of equilibria in an exoge- nous collateral economy by combining the demand approach used by Geanakoplos and Zame, and the characterization of collateralized asset prices offered by Araújo, Fajardo and Pascoa.
The existence of equilibria in a GEI model with default where short sales are backed by collateral (henceforth: exogenous collateral economy), has been demonstrated by Geanakoplos and Zame in a 2002 version of their paper (“Collateral, Default and Market Crashes”). On the other hand, Araújo et al. (2005) have recently provided a character- ization, via non arbitrage, of prices of defaultable assets backed by collateral. The aim of this paper is to provide an alternative proof of the existence of equilibria in an exoge- nous collateral economy by combining the demand approach used by Geanakoplos and Zame, and the characterization of collateralized asset prices offered by Araújo, Fajardo and Pascoa.
 
Publisher Sociedade Brasileira de Econometria
 
Date 2006-05-01
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
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Format application/pdf
 
Identifier http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/2501
10.12660/bre.v26n12006.2501
 
Source Brazilian Review of Econometrics; Vol 26, No 1 (2006); 155-170
Brazilian Review of Econometrics; Vol 26, No 1 (2006); 155-170
1980-2447
 
Language eng
 
Relation http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/2501/1484