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A study was conducted to provide a pricing theory for emerging asset classes like emerging markets. The study also shows how leverage cycles can cause contagion and flight to collateral. An explanation for the volatile access of emerging economies to international financial markets is also presented.

Irving Fisher long advocated inflation-indexed bonds. But with what index? I prove in the context of a multicommodity CAPM world that the best welfare-improving bond pays the minimum money needed to achieve the same utility, and not the minimum needed to buy an ideal commodity bundle.

The implications of diversification in social security portfolios are discussed. It is observed that if the portfolio is not well diversified, there is scope for investment in risky investments, which eventually increases the weighted social welfare function. The effects of technology on the aggregate investment and long-term asset values are also discussed.

The co-existence and non-existence of general equilibrium (GE) and monetary equilibrium (ME), and the cutting edge of the later against the former in terms of real and financial variables, is examined.

Walras equilibria (WE) is found to be with in the limits of Nash equlibria (NE) theorem on non cooperative games. A basic model in which firms compete on how much output to produce and sell, in a single market, is explained. Walras equilibria game is just a variant of the Shapely-Shubik trading-post game.

A model of competitive pooling that incorporates adverse selection and signaling into general equilibrium is built. There is an existence of the separating equilibrium in the Canonical Insurance model of Rothschild and Stiglitz.

An analysis of portfolio management is presented wherein it is observed that with decreasing absolute risk aversion the demand for risky assets increases. However in the case of increasing relative risk aversion, the demand for safe assets is greater than that for risky assets.

Knowledge and rationality will determine the extent to which people will speculate. Incomplete knowledge is usually used as a basis for decision making in which rational agents decide what is common knowledge and acts accordingly. On presuming some things as common knowledge reposes some logical puzzles in economic theory regarding choices, risk-taking and speculation.

We extend the standard model of general equilibrium with incomplete markets to allow for default and punishment by thinking of assets as pools. The equilibrating variables include expected delivery rates, along with the usual prices of assets and commodities. By reinterpreting the variables, our model encompasses a broad range of adverse selection and signalling phenomena in a perfectly competitive, general equilibrium framework. Perfect competition eliminates the need for lenders to compute how the size of their loan or the price they quote might affect default rates. It also makes for a simple equilibrium refinement, which we propose in order to rule out irrational pessimism about deliveries of untraded assets. We show that refined equilibrium always exists in our model, and that default, in conjunction with refinement, opens the door to a theory of endogenous assets. The market chooses the promises, default penalties, and quantity constraints of actively traded assets.

In standard economic theory, the interest rate has long been regarded as the most important variable. Whenever the economy slows, and asset prices fall, economists clamour for lower interest rates [...]