Continuous equilibria with heterogeneous preferences and unspanned endowments
Speaker:
Kasper Larsen, Carnegie Mellon University
Date and Time:
Tuesday, January 12, 2010 - 3:15pm to 4:00pm
Abstract:
We explicitly derive the equilibrium price process in continuous time and state equilibrium models where heterogeneous agents receive partially unhedgeble random endowments. Furthermore, we quantify the positive impact the incompleteness feature combined with the agents’ preference heterogeneity has on the equilibrium risk premium relative to equivalent models where all risks are spanned.