We study a two periods model of incomplete markets with nominal assets unsecured by collateral, where agents can go bankrupt but there are no bankruptcy penalties entering directly in the utility function. We address two cases: first, a proportional reimbursement rule under bounded short sales...

This paper shows new properties about the equilibria of a stationary OG economy by establishing a connection between its stationary equilibria and those of a finite economy, with and without extrinsic uncertainty. Specifically, it shows the countability and local uniqueness with respect to the...

A speculative security is an asset whose payoff depends in part on a random shock uncorrelated with economic fundamentals (a sunspot) about which some traders have superior information. In this paper we show that agents may find it desirable to trade such a security in spite of the fact that it...