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Incentive Constrained Risk Sharing, Segmentation, and Asset Pricing / Bruno Biais, Johan Hombert, Pierre-Olivier Weill.
- Format:
- Book
- Author/Creator:
- Biais, Bruno.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w23986.
- NBER working paper series no. w23986
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2017.
- Summary:
- Incentive problems make securities' payoffs imperfectly pledgeable, limiting agents' ability to issue liabilities. We analyze the equilibrium consequences of such endogenous incompleteness in a dynamic exchange economy. Because markets are endogenously incomplete, agents have different intertemporal marginal rates of substitution, so that they value assets differently. Consequently, agents hold different portfolios. This leads to endogenous markets segmentation, which we characterize with Optimal Trans-port methods. Moreover, there is a basis going always in the same direction: the price of a security is lower than that of replicating portfolios of long positions. Finally, equilibrium expected returns are concave in factor loadings.
- Notes:
- Print version record
- November 2017.
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