Computing equilibria in finance economies with incomplete markets and transaction costs
An algorithm is introduced for the computation of equilibria in general equilibrium models with incomplete asset markets and transaction costs. It is shown that economies with transaction costs can be analyzed with differentiable homotopy techniques and thus in the same framework as frictionless economies despite the existence of non-differentiabilities of agents' asset demand functions and the existence of locally non-unique equilibria.
scientific article; zbMATH DE number 5013651