A Solution Method for Incomplete Asset Markets wih Heterogeneous Agents
Karl H. Schmedders
Swiss Finance Institute; University of Zurich
Kenneth L. Judd
Stanford University - The Hoover Institution on War, Revolution and Peace; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP); National Bureau of Economic Research (NBER)
University of Zurich; Swiss Finance Institute
September 26, 2002
This paper examines a dynamic, stochastic endowment economy with two agents and two financial securities. Markets are incomplete and agents can have heterogeneous tastes. We develop a new computational method to solve the dynamic general equilibrium model. We allow for various forms of portfolio constraints, transaction costs, and portfolio penalties.
Number of Pages in PDF File: 27working papers series
Date posted: June 14, 2006
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