Abstract
We consider the structure of the set of equilibrium allocations in a two-period, pure exchange economy with incomplete financial markets. There are N second period spots and 0< M< N assets. Asset returns are affine functions of spot commodity prices. Economies are parameterized by endowments and asset returns. We show that, for an open, dense set of economies, the set of equilibrium allocations contains a smooth N-dimensional manifold, provided that there are ‘enough’ consumers and that ( N− M) M≧ N.
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