Download or read book Asset Prices in an Exchange Economy with Money and Trade recurso Electr nico written by Raphael Espinoza and published by . This book was released on 2007 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Asset Prices in an Exchange Economy with Money and Trade written by Raphael A. Espinoza and published by . This book was released on 2007 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show, in an exchange economy with liquidity constraints, that state prices in a complete markets general equilibrium are a function of the supply of liquidity by the Central Bank. Our model is derived along the lines of Dubey and Geanakoplos (1992). Two agents trade goods and nominal assets (Arrow-Debreu (AD) securities) to smooth consumption across periods and future states, in the presence of cash-in-advance financing costs. We show, with Von Neumann-Morgenstern utility functions and relative risk-aversion greater than 1, that the price of AD securities, are inversely related to liquidity. A closed-from solution is obtained for a CRRA utility function, even when including aggregate uncertainty and different subjective probabilities for the two agents. The upshot of our argument is that agents' expectations computed using risk-neutral probabilities give more weight in the states with higher interest rates. This result cannot be found in a Lucas-type representative agent general equilibrium model where there is neither trade nor money. Hence, an upward yield curve can be supported in equilibrium, even though short-term interest rates are fairly stable, and even in the absence of aggregate uncertainty. The risk-premium in the term structure is therefore a pure liquidity risk premium.
Download or read book Asset Pricing for Dynamic Economies written by Sumru Altug and published by Cambridge University Press. This book was released on 2008-09-11 with total page 702 pages. Available in PDF, EPUB and Kindle. Book excerpt: This introduction to general equilibrium modelling takes an integrated approach to the analysis of macroeconomics and finance. It provides students, practitioners, and policymakers with an easily accessible set of tools that can be used to analyze a wide range of economic phenomena. Key features: • Provides a consistent framework for understanding dynamic economic models • Introduces key concepts in finance in a discrete time setting • Develops simple recursive approach for analyzing a variety of problems in a dynamic, stochastic environment • Sequentially builds up the analysis of consumption, production, and investment models to study their implications for allocations and asset prices • Reviews business cycle analysis and the business cycle implications of monetary and international models • Covers latest research on asset pricing in overlapping generations models and on models with borrowing constraints and transaction costs • Includes end-of-chapter exercises allowing readers to monitor their understanding of each topic Online resources are available at www.cambridge.org/altug_labadie
Download or read book Uniqueness of Asset Prices in an Exchange Economy with Unbounded Utility written by Takashi Kamihigashi and published by . This book was released on 1998 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies conditions under which the price of an asset is uniquely determined by its fundamental value (i.e., no bubbles can arise) in Lucas-type asset pricing models with unbounded utility. After discussing Gilles and LeRoy's (1992) example, we construct an example of a two-period, representative agent economy to demonstrate that bubbles can arise in a standard model if utility isunbounded below, in which case the stochastic Euler equation may be violated. In an in nite horizon framework, we show that bubbles cannot arise if the optimal sequence of asset holdings can be lowered uniformly without incurring an infinite utility loss. Using this result, we develop conditions for the nonexistence of bubbles. The conditions depend exclusively on the asymptotic behavior of marginal utility at zero and in nity. They are satisfied by many unbounded utility functions, including the entire CRRA (constant relative risk aversion) class. The Appendix provides a complete market version of our two-period example.
Download or read book Asset Prices and Monetary Policy written by John Y. Campbell and published by University of Chicago Press. This book was released on 2008-11-15 with total page 444 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic growth, low inflation, and financial stability are among the most important goals of policy makers, and central banks such as the Federal Reserve are key institutions for achieving these goals. In Asset Prices and Monetary Policy, leading scholars and practitioners probe the interaction of central banks, asset markets, and the general economy to forge a new understanding of the challenges facing policy makers as they manage an increasingly complex economic system. The contributors examine how central bankers determine their policy prescriptions with reference to the fluctuating housing market, the balance of debt and credit, changing beliefs of investors, the level of commodity prices, and other factors. At a time when the public has never been more involved in stocks, retirement funds, and real estate investment, this insightful book will be useful to all those concerned with the current state of the economy.
Download or read book Money Payments and Liquidity second edition written by Guillaume Rocheteau and published by MIT Press. This book was released on 2017-05-12 with total page 501 pages. Available in PDF, EPUB and Kindle. Book excerpt: A new edition of a book presenting a unified framework for studying the role of money and liquid assets in the economy, revised and updated. In Money, Payments, and Liquidity, Guillaume Rocheteau and Ed Nosal provide a comprehensive investigation into the economics of money, liquidity, and payments by explicitly modeling the mechanics of trade and its various frictions (including search, private information, and limited commitment). Adopting the last generation of the New Monetarist framework developed by Ricardo Lagos and Randall Wright, among others, Nosal and Rocheteau provide a dynamic general equilibrium framework to examine the frictions in the economy that make money and liquid assets play a useful role in trade. They discuss such topics as cashless economies; the properties of an asset that make it suitable to be used as a medium of exchange; the optimal monetary policy and the cost of inflation; the coexistence of money and credit; and the relationships among liquidity, asset prices, monetary policy; and the different measures of liquidity in over-the-counter markets. The second edition has been revised to reflect recent progress in the New Monetarist approach to payments and liquidity. Rocheteau and Nosal have added three new chapters: on unemployment and payments, on asset price dynamics and bubbles, and on crashes and recoveries in over-the-counter markets. The chapter on the role of money has been entirely rewritten, adopting a mechanism design approach. Other chapters have been revised and updated, with new material on credit economies under limited commitment, open-market operations and liquidity traps, and the limited pledgeability of assets under informational frictions.
Download or read book Asset Prices and Liquidity in an Exchange Economy written by Ricardo A. Lagos and published by . This book was released on 2006 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Asset Prices and Liquidity in an Exchange Economy written by Ricardo Lagos and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I develop an asset-pricing model in which financial assets are valued for their liquidity-the extent to which they are useful in facilitating exchange-as well as for being claims to streams of consumption goods. The implications for average asset returns, the equity-premium puzzle and the risk-free rate puzzle, are explored in a version of the model that nests the work of Mehra and Prescott (1985).
Download or read book Exchange Rate Theory and Practice written by John F. Bilson and published by University of Chicago Press. This book was released on 2007-12-01 with total page 542 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume grew out of a National Bureau of Economic Research conference on exchange rates held in Bellagio, Italy, in 1982. In it, the world's most respected international monetary economists discuss three significant new views on the economics of exchange rates - Rudiger Dornbusch's overshooting model, Jacob Frenkel's and Michael Mussa's asset market variants, and Pentti Kouri's current account/portfolio approach. Their papers test these views with evidence from empirical studies and analyze a number of exchange rate policies in use today, including those of the European Monetary System.
Download or read book Asset Pricing and the Credit Market written by Francis A. Longstaff and published by . This book was released on 2009 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study asset pricing and trading behavior in an exchange economy populated by two agents with different risk aversion. We show that the credit market plays a central role in the risk sharing between the two agents. It allows the less-risk-averse agent to borrow in order to take on levered positions in the stock and thus bear more risk. Optimal risk sharing results in the more-risk-averse agent effectively selling covered callquot; options to the less-risk-averse agent. As the state of the economy changes, the equilibrium amount of credit in the market also fluctuates, which in turn influences expected stock returns, stock return volatility, the term structure of interest rates, and trading activity in the stock market. We further explore the immediate empirical implication that variation in the size of the credit market is related to variation in expected stock returns. Using various measures of changes in the size of the credit market, we find that they have significant power in forecasting one-year excess returns of the stock market. Our results suggests that the credit sector is of fundamental importance to the behavior of asset prices.
Download or read book Money Interest Rates and Exchange Rates with Endogenously Segmented Asset Markets written by Fernando Alvarez and published by . This book was released on 2000 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the effects of money injections on interest rates and exchange rates in a model in which agents must pay a Baumol-Tobin style fixed cost to exchange bonds and money. Asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money only infrequently. When the government injects money through an open market operation, only those agents that are currently trading absorb these injections. Through their impact on these agents' consumption, these money injections affect real interest rates and real exchange rates. We show that the model generates the observed negative relation between expected inflation and real interest rates. With moderate amounts of segmentation, the model also generates other observed features of the data: persistent liquidity effects in interest rates and volatile and persistent exchange rates. A standard model with no fixed costs can produce none of these features.
Download or read book Liquidity and Asset Prices written by Yakov Amihud and published by Now Publishers Inc. This book was released on 2006 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.
Download or read book International Trade and Money written by Michael B. Connolly and published by Routledge. This book was released on 2018-03-15 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book, first published in 1973, presents a collection of original contributions to the analysis of international trade and monetary relations by a number of distinguished economists. The papers bear on six topics in trade theory: the inadequacies of classical trade theory, customs unions, immiserising growth, the international transmission of technical change, multinational company behaviour, and comparative trends in income distribution. Chapters dealing with international monetary relations focus on general equilibrium analysis of spot and forward exchange markets, money supply analysis in open economies, devaluation in developing countries, the sharing of the burden of international adjustment, the monetary approach to balance-of-payments theory, and the integration of Keynesian and monetary approaches to international adjustment. Taken together, they summarize much of the most advanced contemporary research in international economics. The volume is unified by the contributors' common belief that economic theory can help solve important and relevant problems in international economic relations. All the contributions represent original work on the frontiers of research in international economics, but they use simple and understandable techniques to reach their conclusions.
Download or read book Asset Markets Exchange Rates and the Balance of Payments written by Jacob A. Frenkel and published by . This book was released on 1984 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper, written as a chapter for a Handbook of International Economics, reviews developments in the theory of international monetary economics from the late 1960's through the early 1980's. Following a review of the operation of the monetary mechanism of balance of payments adjustment in the context of the Mundell-Fleming model, the paper reviews the more modern analysis of the dynamics of balance of payments adjustment under fixed exchange rates and of exchange rate determination under flexible exchange rates. Beginning with a simple exposition of the monetary mechanism, the model is then extended to incorporate sluggish wage and output adjustments, endogenous monetary policy and sterilization operations, multiplicity of tradable and nontradable goods, large countries, capital mobility and portfolio balance. The review then turns to an exposition of exchange rate theory, starting with the monetary approach to exchange rate determination. Issues discussed in this context include purchasing power parities, nontraded goods, the real exchange rate, currency substitution and the interaction between real and monetary factors in effecting exchange rates. The paper proceeds with a presentation of a more general framework that views the question of exchange rate determination as part of the general theory of the determination of asset prices, and which highlights the unique role of expectations. The general framework is then applied to characterize the interaction between the balance of payments and the equilibrium real exchange rate. The paper concludes with a brief discussion of some empirical issues of exchange rate analysis.
Download or read book Asset Pricing in an Exchange Economy with Bayesian Agents written by Francisco Azeredo and published by . This book was released on 2007 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper extends the standard Mehra-Prescott one-good, pure exchange economy to the case where agents are assumed to be in ignorance of the true transition probabilities of the growth rate of output and to learn them using bayes rule. The main conclusion is that the proposed bayes model yields asset prices and equity premium that are nearly identical to the one in the standard model when the expected transition probabilities of the former equals the transition probabilities of the latter.
Download or read book General Equilibrium Models of Monetary Economies written by Ross M. Starr and published by . This book was released on 1989 with total page 378 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Foreign Exchange written by Adam S. Iqbal and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This book provides an exhaustive and even-handed review of the existing literature on exchange rate determination, along with a raft of fresh insights. The author provides a unique marriage of academic precision with an investor's practical experience to deliver a rigorous yet intuitive application of asset-pricing theory to foreign exchange. Foreign Exchange: Practical Asset Pricing and Macroeconomic Theory should become the canonical text on this subject." -Nick Wilson, FX Portfolio Manager, Citadel "This new book is a treasure trove. Iqbal presents a practical and useful framework that includes various macroeconomic and monetary economic concepts relating to foreign exchange, such as risk premiums, interest rates, and inflation. Many real-world examples illustrate how these concepts relate to each other. I have enjoyed reading every page of this book and I strongly recommend it to academics, students, and indeed, anybody interested in how foreign exchange markets interact with macroeconomics." -Johannes Ruf, Professor, London School of Economics "Iqbal's Foreign Exchange diligently captures the intuition behind risk premia in FX markets and their theoretical underpinnings, whilst also being practically relevant for the reader. This book is an important and much needed foundational text for students, researchers, and practitioners alike who want to truly understand foreign exchange markets, their drivers and uncertainties, be it from risk premiums, macroeconomic, or monetary economic sources." -Dr. Farouk Jivraj, Head of Alternative Risk Premia, Fidelity Investments "In an age when foreign exchange has increasingly become the turf of high frequency algo traders rather than fundamental investors, Adam Iqbal's book provides an excellent and comprehensive overview of an asset class that, given the rising macro-economic volatility, is likely to regain its characteristics as prime instrument for hedging and thematic macro expression. By approaching foreign exchange via the risk premium conceptual framework, Adam is equipping the reader to identify dislocations and opportunities in a rapidly changing world. With the right balance of theory and practice, Foreign Exchange: Practical Asset Pricing and Macroeconomic Theory is accessible and should be of interest to both academic and professional readers." -Borislav Vladimirov, Managing Director, Macro Strategist, Goldman Sachs.
