# Incomplete markets over an infinite horizon: long-lived securities and speculative bubbles

Article Abstract:

Sequence economies over an infinite horizon with general security structures are analyzed. It is assumed that there is a pseudo-equilibrium for all economies and that there is an equilibrium for a dense set of economies. Hence, the indebtedness of the agents in equilibrium can be constrained either through an explicit bound on their debts or by a transversality condition restricting the asymptotic growth of their debts. The prices of infinite-lived securities in zero net supply are found to allow speculative bubbles and these can alter the equilibrium allocation.

Publication Name: The Journal of Mathematical Economics

Subject: Mathematics

ISSN: 0304-4068

Year: 1996

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# Debt constraints and equilibrium in infinite horizon economies with incomplete markets

Article Abstract:

A concept of an equilibrium and a pseudo-equilibrium for infinite horizon economies with incomplete asset markets is presented. This notion generalizes the conventional ones for finite horizon economies with incomplete markets and for infinite horizon economies with complete markets. There exists a pseudo-equilibrium when assets are short-lived and denominated in general commodity bundles. A true equilibrium is attained when assets are denominated only in a single numeraire commodity or in units of account.

Publication Name: The Journal of Mathematical Economics

Subject: Mathematics

ISSN: 0304-4068

Year: 1996

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# The existence of security market equilibrium with a non-atomic state space

Article Abstract:

A finite horizon economy with incomplete markets is analyzed which at every period, a non-atomic continuum of states of nature exists. Backward recursion techniques are use in conjunction with a reformulation of the problem in terms of first-order conditions to determine the existence of a Radner equilibrium. Findings reveal that in any date and state the position attained after any possible previous asset trades constitutes a possible consumption even in the case of countable many states.

Publication Name: The Journal of Mathematical Economics

Subject: Mathematics

ISSN: 0304-4068

Year: 1996

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