An Application of Convex Analysis to General Equilibrium Theory with Incomplete Financial Markets

This paper considers an application of convexanalysis to the study of corporate equilibria in a two periodendogenized asset general equilibrium model with incompletefinancial markets. It shows by means of a particular case studythat for a fixed financial policy every extensive form stockmarket equilibrium can be translated into a reduced formequilibrium. This result suggests determinateness of corporateequilibria for varying financial parameters. A change in thefirm’s financial policy changes the production set available to itin the next period, hence real effects