On the positive fundamental value of money with short-sale constraints

Abstract

Money, Short-sale constraints, Fundamental value, Asset pricing bubbles, (Technically) incomplete financial markets, Financial recognizability and insurance services, D52, E41, G12,

Long-lived collateralized assets and bubbles

“…Since (w h µ ) µ≥ξ is uniformly bounded away from zero, it follows from item (iii) in Proposition 1 that, for any η ∈ D(ξ), η∈D γµ γ h η p µ Σ < +∞. Thus, independently of τ , assets are free of Γ h −bubbles due that collateral requirements are uniformly bounded and condition (8) holds.…”

“…This is incompatible with the absence of commodity bubbles in D(ξ). In fact, using the non-arbitrage condition (8), Assumption C together with the particular collateral structure of the mortgage imply that q µ,j ≤ p µ C µ,j ≤ l∈L p µ,l Y µ (·, l)a l (µ − , ξ)C ξ,j,l .…”

Fiat money and the value of binding portfolio constraints

“…Analogous arguments to those made in Claims A1-A3 in Araujo, Páscoa and Torres-Martínez (2008) implies that, 5 In fact, as (y h (ξ)) ξ∈D is optimal and U h (x h ) < +∞, it follows that there exists a solution for P h,T if and only if there exists a solution for the problem,…”

“…Giménez (2007) already made this comment and Araujo, Páscoa and Torres-Martínez (2008) worked along these lines when addressing the pricing of long-lived collateralized assets.…”

The value of money in a dynamic equilibrium model

“…First, note that condition (3.1) may hold under other trading restrictions such as short-sale constraints and reserve requirements (cf., Gimenez, 2000;Michel and Wigniolle, 2003). Indeed, as illustrated in the Appendix below the shadow value attached to the price of money may be associated with various other intangible returns attributed to monetary holdings.…”