Format du dépôt |
Fichier |
Type de dépôt |
Pré-publication, Document de travail |
Titre |
en
Incomplete markets, liquidation risk, and the term structure of interest rates
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Résumé |
en
We analyse the term structure of interest rates in a general equilibrium model with incomplete markets, borrowing constraint, and positive net supply of government bonds. Uninsured idiosyncratic shocks generate bond trades, while aggregate shocks cause fluctuations in the trading price of bonds. Long bonds command a "liquidation risk premium" over short bonds, because they may have to be liquidated before maturity following a bad idiosyncratic shock precisely when their resale value is low due to the simultaneous occurrence of a bad aggregate shock. Our framework endogenously generates limited cross-sectional wealth heterogeneity among the agents (despite the presence of uninsured idiosyncratic shocks), which allows us to characterise analytically the shape of the entire yield curve, including the yields on bonds of arbitrarily long maturities. Agents desire to hedge the idiosyncratic risk together with their fear of having to liquidate long bonds at unfavourable terms imply that a greater bond supply raises the level of the yield curve, while an increase in the relative supply of long bonds raises its slope.
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Auteur(s)
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Edouard Challe
1, 2, 3
, François Le Grand
4, 5
, Xavier Ragot
6, 7, 8
1
X-DEP-ECO -
Département d'Économie de l'École Polytechnique
( 444480 )
- École Polytechnique, 91128 Palaiseau Cedex
- France
-
École polytechnique ( 300340 )
2
CREST -
Centre de Recherche en Économie et Statistique
( 2579 )
- 5, Avenue Henry Le Chatelier, 91120 Palaiseau
- France
-
Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] ( 244399 )
;
-
École polytechnique ( 300340 )
;
-
École Nationale de la Statistique et de l'Administration Économique ( 300604 )
;
-
Centre National de la Recherche Scientifique UMR 9194 ( 441569 )
3
Banque de France
( 88251 )
- France
4
EM -
EMLyon Business School
( 301362 )
- 23 Avenue Guy de Collongue, 69134 Ecully cedex
- France
5
ETH Zürich -
Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]
( 180925 )
- Hauptgebäude, Rämistrasse 101, 8092 Zürich
- Suisse
6
Centre de recherche de la Banque de France
( 171776 )
- 31 rue Croix des petits champs 75001 PARIS - France
- France
-
Banque de France ( 307910 )
7
PSE -
Paris School of Economics
( 301309 )
- 48 boulevard Jourdan 75014 Paris
- France
-
Université Paris 1 Panthéon-Sorbonne ( 7550 )
;
-
École normale supérieure - Paris ( 59704 )
;
-
Université Paris Sciences et Lettres ( 564132 )
;
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École des hautes études en sciences sociales ( 99539 )
;
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École des Ponts ParisTech ( 301545 )
;
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Centre National de la Recherche Scientifique ( 441569 )
;
-
Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement ( 577435 )
8
PSE -
Paris-Jourdan Sciences Economiques
( 139754 )
- 48 boulevard Jourdan 75014 Paris
- France
-
École normale supérieure - Paris ( 59704 )
;
-
Université Paris Sciences et Lettres ( 564132 )
;
-
Institut National de la Recherche Agronomique USC1336 ( 92114 )
;
-
École des hautes études en sciences sociales ( 99539 )
;
-
École des Ponts ParisTech ( 301545 )
;
-
Centre National de la Recherche Scientifique UMR8545 ( 441569 )
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Langue du document |
Anglais
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Domaine(s) |
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Sciences de l'Homme et Société/Economies et finances
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Mots-clés (JEL) |
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E - Macroeconomics and Monetary Economics/E.E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy/E.E2.E21 - Consumption • Saving • Wealth
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E - Macroeconomics and Monetary Economics/E.E4 - Money and Interest Rates/E.E4.E43 - Interest Rates: Determination, Term Structure, and Effects
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G - Financial Economics/G.G1 - General Financial Markets/G.G1.G12 - Asset Pricing • Trading Volume • Bond Interest Rates
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Référence interne |
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cahier de recherche 2013-14
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Mots-clés |
en
Yield curve, Yield curve., Borrowing constraint, Incomplete markets
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