Quantitative Asset Pricing Implications of Endogenous Solvency Constraints
Fernando Alvarez and
Urban Jermann ()
Review of Financial Studies, 2001, vol. 14, issue 4, 1117-51
We study the asset pricing implications of an economy where solvency constraints are endogenously determined to deter agents from defaulting while allowing as much risk sharing as possible. We solve analytically for efficient allocations and for the corresponding asset prices, portfolio holdings, and solvency constraints for a simple example. Then we calibrate a more general model to U.S. aggregate as well as idiosyncratic income processes. We find equity premia, risk premia for long-term bonds, and Sharpe ratios of magnitudes similar to the U.S. data for low risk aversion and a low time-discount factor. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
References: Add references at CitEc
Citations: View citations in EconPapers (81) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Working Paper: Quantitative asset pricing implications of endogenous solvency constraints (1999)
Working Paper: Quantitative Asset Pricing Implications of Endogenous Solvency Constraints (1999)
Working Paper: Quantitative Asset Pricing Implications of Endogenous Solvency Constraints
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:14:y:2001:i:4:p:1117-51
Ordering information: This journal article can be ordered from
Access Statistics for this article
Review of Financial Studies is currently edited by Maureen O'Hara
More articles in Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().