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Fields:

Monitored financial equilibria

Journal of Banking & Finance 2004 28(9), 2213-2235
The financial monitoring system is formalized as an economic primitive in addition to preferences, endowments, production sets and asset spans. New definitions of budget constraints and economic equilibria follow. The concept of a general equilibrium is then appropriately revised to accommodate this perspective on the role of a financial monitoring system. Implications for asset pricing are derived and the relationship of equilibria to risk management considerations is discussed.