Econometrica: Jul 2002, Volume 70, Issue 4

Collateral Avoids Ponzi Schemes in Incomplete Markets

https://doi.org/10.1111/1468-0262.00343
p. 1613-1638

Aloisio Araujo, Mário Rui Páscoa, Juan Pablo Torres–Martínez

Without introducing either debt constraints or transversality conditions to avoid the possibility of Ponzi schemes, we show the existence of equilibrium in an infinite horizon incomplete markets economy with a collateral structure.

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