Dynamic stochastic general equilibrium models with ex-post heterogeneity due to idiosyncratic risk have to be solved numerically. This is a nontrivial task as the cross-sectional distribution of endogenous variables becomes an element of the state space due to aggregate risk. Existing global...

We develop an isotone recursive approach to the problem of existence, computation, and characterization of non-symmetric locally Lipschitz continuous (and, therefore, Clarke-differentible) Markovian equilibrium for a class of infinite horizon multiagent competitive equilibrium models with...

We consider the derivatives pricing problem in credit risk. By assessing a market price to the hedged risks and a Capital Asset Pricing Model price to the unhedged part, we derive a generalized pricing formula that nests both the classic “Capital Markets” and “Corporate Finance” models....

In this paper, we introduce the concept of "self-justified equilibria" as a tractable alternative to rational expectations equilibria in stochastic general equilibrium models with heterogeneous agents. A self-justified equilibrium is a temporary equilibrium where, in each period, agents trade in...

We consider dynamic stochastic economies with heterogeneous agents and introduce the concept of uniformly self-justified equilibria (USJE)---temporary equilibria for which forecasts are best uniform approximations to a selection of the equilibrium correspondence. In a USJE, individuals'...

With assets taken to be pools, rational expectations on their delivery rates are, as default is permissible in an economy and its penalty prescribed in terms of utility, indispensable to the existence of equilibrium. And the resulting equilibrium relies heavily on the prevailing penalty level....

In this paper, I study the existence and uniqueness of recursive equilibria in economies with aggregate and idiosyncratic risk. Rather than relying on compactness to establish existence, I exploit the monotonicity property of the equilibrium model and rely on arguments from convex analysis. This...

This paper analyzes the stability of the (Pareto efficient) nonsunspot equilibria as a function of the constraints faced by consumers in their ability to transfer wealth between states of nature. Equilibria that are stable for the certainty economy define nonsunspot equilibria that are stable in...

This paper presents a method to construct a sequence of approximate policy functions of increasing accuracy on non-local domains. The method is based upon the notion of stable manifold originated from dynamical systems theory. The approximate policy functions are constructed employing the...

We propose a nonparametric approach to multiple calibration of numerical general equilibrium models, where counterfactual equilibria are solutions to the Walrasian inequalities. We present efficient approximation schemes for deciding the solvability of Walrasian inequalities