Equilibrium asset pricing in networks with mutually exciting jumps

  • We analyze the implications of the structure of a network for asset prices in a general equilibrium model. Networks are represented via self- and mutually exciting jump processes, and the representative agent has Epstein-Zin preferences. Our approach provides a exible and tractable unifying foundation for asset pricing in networks. The model endogenously generates results in accordance with, e.g., the robust-yetfragile feature of financial networks shown in Acemoglu, Ozdaglar, and Tahbaz-Salehi (2014) and the positive centrality premium documented in Ahern (2013). We also show that models with simpler preference assumptions cannot generate all these findings simultaneously.

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Author:Nicole BrangerORCiDGND, Patrick Konermann, Christoph MeinerdingORCiDGND, Christian Schlag
Parent Title (German):SAFE working paper series ; No. 74
Series (Serial Number):SAFE working paper (74)
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2014
Year of first Publication:2014
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2014/11/11
Tag:Asset Pricing; Dynamic Networks; General Equilibrium; Mutually Exciting Processes; Recursive Preferences
Issue:Version November 2014
Page Number:42
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht