In this paper, I compare the accuracy of the two existing methods for solving stochastic general equilibrium models with dynamic portfolio choice and incomplete markets: one proposed by Hnatkovska (2010) and Evans and Hnatkovska (2005, 2011) (EH), another - attributed to Devereux and Sutherland...

Survival conditions ensure the presence of consumptions that cost less than the total contingent income of agents in general equilibrium models. These conditions are generally fulfilled in competitive equilibrium. This paper shows the existence of equilibrium for incomplete-market economies...

We study consumption-portfolio and asset pricing frameworks with recursive preferences and unspanned risk. We show that in both cases, portfolio choice and asset pricing, the value function of the investor/representative agent can be characterized by a specific semilinear partial differential...

This article shows that the presence of portfolio constraints can give rise to rational asset pricing bubbles in equilibrium even if there are unconstrained agents in the economy who can bene t from the corresponding limited arbitrage opportunities. Furthermore, it is shown that when they are...

We study continuous-time optimal consumption and investment with Epstein-Zin recursive preferences in incomplete markets. We develop a novel approach that rigorously constructs the solution of the associated Hamilton-Jacobi-Bellman equation by a fixed point argument and makes it possible to...

We study dynamic general equilibrium in a Lucas economy with two trees, one consumption good, two CRRA investors with heterogeneous risk aversions, and portfolio constraints. We focus on margin and leverage constraints, which restrict access to credit markets. We find positive relationship...

In this paper, we study the effect of proportional transaction costs on consumption-portfolio decisions and asset prices in a dynamic general equilibrium economy with a financial market that has a single-period bond and two risky stocks, one of which incurs the transaction cost. Our model has...

In this paper, we study the effect of proportional transaction costs on consumption- portfolio decisions and asset prices in a dynamic general equilibrium economy with a financial market that has a single-period bond and two risky stocks, one of which incurs the transaction cost. Our model has...

We study how trading costs are reflected in equilibrium returns. To this end, we develop a tractable continuous-time risk-sharing model, where heterogeneous mean-variance investors trade subject to a quadratic transaction cost. The corresponding equilibrium is characterized as the unique...

This paper derives an equilibrium asset pricing model with liquidity risk. Liquidity risk is modeled as a stochastic quantity impact on the price from trading, where the size of the impact depends on trade size. Under a mild set of assumptions, we prove that an equilibrium price process exists...