English, Article, Journal or magazine article edition: Moral Hazard, Aggregate Risk and Nominal Linear Financial Contracts Alessandro, CITANNA; Archishman, CHAKRABORTY

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Bookmark: http://trove.nla.gov.au/version/23448
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Moral Hazard, Aggregate Risk and Nominal Linear Financial Contracts
Author
  • Alessandro, CITANNA
  • Archishman, CHAKRABORTY
Physical Description
  • preprint
Notes
  • We study competitive equilibria with moral hazard in economies with aggregate risk and where trading occurs with an incomplete set of financial assets. The main conclusion of the paper is that, contrary to the individual risk economies, moral hazard is compatible with trading in competitive linear financial contracts, and gives rise to no manipulation problem. We establish existence of nonmanipulable equilibria provided that there are no relative price effects (e.g., a one-commoditiy economy), and that financial markets display nonlinearly homogeneous payoffs (e.g., nominal), and are sufficiently incomplete. Finally, we justify the linear contract as the optimal pricing schedule in a specific trading game with an auctioneer.
  • moral hazard; linear contracts
  • RePEc:ebg:heccah:0683
Language
  • English
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