The Structure of Financial Equilibrium with Exogenous Yields: The Case of Incomplete Markets

1989/01/01 by Yves Balasko, David Cass · 166 citations
Economics, Econometrics and Finance · #Economic Theory and Institutions #Economic Theory and Policy #Economic theories and models #Economics #Finance #Financial market #General equilibrium theory #Incomplete markets #Microeconomics #Monetary economics

paper · doi:10.2307/1912576

published in Econometrica 57(1), 135 (Wiley)

openalex publication_date 1989/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/06/11

Abstract

This paper presents an analysis of the structure of competitive equilibrium in a smooth, exchange economy where there are incomplete markets in financial instruments whose overall payoffs (both prices and yields) are fixed in units of account. The main result establishes that such market incompleteness generates a comparable degree of allocation indeterminateness. It is also shown how this real indeterminacy may increase when prices and yields are treated as variables rather than parameters. Copyright 1989 by The Econometric Society.

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