NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Asymptotic Methods for Asset Market Equilibrium Analysis

Kenneth L. Judd, Sy-Ming Guu

NBER Working Paper No. 8135
Issued in February 2001
NBER Program(s):   AP

General equilibrium analysis is difficult when asset markets are incomplete. We make the simplifying assumption that uncertainty is small and use bifurcation methods to compute Taylor series approximations for asset demand and asset market equilibrium. A computer must be used to derive these approximations since they involve large amounts of algebraic manipulation. To illustrate this method, we apply it to analyzing the allocative, price, and welfare effects of introducing a new derivative security. We find that the introduction of any derivative will raise the value of the risky asset relative to bonds.

download in pdf format
   (1192 K)

email paper

This paper is available as PDF (1192 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w8135

Published: Judd, Kenneth L. and Sy-Ming Guu. ÔÇťAsymptotic Methods for Asset Market Equilibrium Analysis." Economic Theory 18 (2001): 127-157. citation courtesy of

Users who downloaded this paper also downloaded these:
Gaspar and Judd t0207 Solving Large Scale Rational Expectations Models
Evans and Hnatkovska t0318 Solving General Equilibrium Models with Incomplete Markets and Many Assets
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us