Asset Pricing with Dynamic Margin Constraints

99 Pages Posted: 13 Feb 2009 Last revised: 29 Nov 2014

See all articles by Oleg Rytchkov

Oleg Rytchkov

Temple University - Department of Finance

Date Written: February 6, 2013

Abstract

The paper provides a novel theoretical analysis of how endogenous time-varying margin requirements affect capital market equilibrium. It finds that margin requirements, when there are no other market frictions, reduce the volatility and the correlation of returns as well as the risk-free rate, but increase the market price of risk, the risk premium, and the price of risky assets. Furthermore, margin requirements generate a strong cross-sectional dispersion of stock return volatilities. The paper emphasizes that a general equilibrium analysis may reverse the conclusions of a partial equilibrium analysis often employed in the literature.

Keywords: exchange economy, margin requirements, general equilibrium

JEL Classification: G11, G12

Suggested Citation

Rytchkov, Oleg, Asset Pricing with Dynamic Margin Constraints (February 6, 2013). EFA 2009 Bergen Meetings Paper, Journal of Finance, Vol. 69, pp. 405-452, 2014, Available at SSRN: https://ssrn.com/abstract=1341959 or http://dx.doi.org/10.2139/ssrn.1341959

Oleg Rytchkov (Contact Author)

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
358
Abstract Views
1,639
rank
94,087
PlumX Metrics