Computing equilibria in economies with incomplete markets, collateral and default penalties

Computing equilibria in economies with incomplete markets, collateral and default penalties

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Article ID: iaor20133929
Volume: 206
Issue: 1
Start Page Number: 367
End Page Number: 383
Publication Date: Jul 2013
Journal: Annals of Operations Research
Authors:
Keywords: augmented Lagrangian, market efficiency
Abstract:

This article implements an Augmented Lagrangian algorithm to compute equilibria in a general equilibrium model with incomplete markets and default. It is one of the first attempts to solve such a model on a large scale. Convergence is found for various economic parameters. We illustrate the effectiveness of this approach for simulating general equilibrium economies with a default.

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