Default and exogenous collateral in incomplete markets with a continuum of states (Q5931987)

The referred paper aims to show the existence of equilibria in an economy with a finite number of agents, a continuum of states, and incomplete markets without imposing any assumption on ex post endowments. Instead of this assumption the concept of default subject to sale of assets that are backed by the purchase of durable goods serving as collateral, is introduced. The only condition to guarantee the existence of equilibrium, in addition to the usual assumptions on utilities and endowments, is that the sales of assets should be backed by durable physical commodities.