Quantitative Asset Pricing Implications of Endogenous Solvency Constraints

Fernando Alvarez and Urban Jermann

No 6953, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the asset pricing implications of an economy where solvency constraints are determined to efficiently deter agents from defaulting. We present a simple example for which efficient allocations and all equilibrium elements are characterized analytically. The main model produces large equity premia and risk premia for long term bonds with low risk aversion and a plausibly calibrated income process. We characterize the deviations from independence of aggregate and individual income uncertainty that produce equity and term premia.

JEL-codes: D50 G12 (search for similar items in EconPapers)
Date: 1999-02
New Economics Papers: this item is included in nep-dge and nep-mic
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Alvarez, F. and U. J. Jermann. "Quantitative Asset Pricing Implications Of Endogenous Solvency Constructs," Review of Financial Studies, 2001, v14(4,Oct), 1117-1151.

Downloads: (external link)
http://www.nber.org/papers/w6953.pdf (application/pdf)

Related works:
Journal Article: Quantitative Asset Pricing Implications of Endogenous Solvency Constraints (2001)
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) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:6953

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w6953

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().