Endogenous state prices, liquidity, default, and the yield curve
We show, in an exchange economy with default, liquidity constraints and no aggregate uncertainty, that state prices in a complete markets general equilibrium are a function of the supply of liquidity by the Central Bank. Our model is derived along the lines of Dubey and Geanakoplos (1992). Two agent...
| Main Authors: | , |
|---|---|
| Format: | Working paper |
| Published: |
University of Oxford
2007
|