are presented within a costly state verification model with a risk averse entrepreneur. The prospect of disputes …

continuously on states of nature. It is shown that: 1. if financial markets are complete, then asset prices vary continuously with … states of nature, and; 2. if financial markets are incomplete, jumps in asset prices may be unavoidable. Consequently … incomplete financial markets may increase volatility in asset prices significantly. …

kernel generates a market price of risk that is substantially larger than the standard complete markets asset pricing kernel. …We evaluate the asset pricing implications of a class of models in which risk sharing is imperfect because of the … kernel implied by the model and to evaluate its performance in pricing aggregate risk. We employ the same data to construct …

demonstrated in a costly state verification model with a risk averse entrepreneur. The prospect of disputes encourages incentive …

This paper formalizes the idea that more hedging instruments may destabilize markets when traders are heterogeneous and …

demonstrated in a costly state verification model with a risk averse entrepreneur. The prospect of disputes encourages incentive …

occurs for both complete and incomplete asset markets. …

governs the direction of the distortion. Moreover, contracts that complete markets dampen the impact of pecuniary …

originators to hold some skin-in-the-game, markets remain incomplete and risk-sharing is limited. In this case, fire-sales are …This paper studies the welfare properties of competitive equilibria in an economy with incomplete markets subject to … idiosyncratic and aggregate shocks. We focus on the role of securitization, whereby borrowers can reduce idiosyncratic asset risk …