Competitive equilibria in infinite-horizon collateralized economies with default penalties

Araújo, Páscoa and Torres-Martinez (2002) have shown that, without imposing either debt constraints or transversality conditions, Ponzi schemes are ruled out in infinite horizon economies with default when collateral is the only mechanism that partially secures loans. Páscoa and Seghir (2008) subsequently show that Ponzi schemes may reappear if, additionally to the seizure of the collateral, there are sufficiently harsh default penalties assessed (directly in terms of utility) against the defaulters. They also claim that if default penalties are moderate then Ponzi schemes are ruled out and existence of a competitive equilibrium is ensured. The objective of this paper is two fold. First, contrary to what is claimed by Páscoa and Seghir (2008), we show that moderate default penalties do not always prevent agents to run a Ponzi scheme. Second, we provide an alternative condition on default penalties that is sufficient to rule out Ponzi schemes and ensure the existence of a competitive equilibrium.

On Ponzi schemes in infinite horizon collateralized economies with default penalties

Araujo, Páscoa and Torres-Martínez (2002) showed that, without imposing any debt constraint, Ponzi schemes are ruled out in infinite horizon economies with limited commitment when collateral is the only mechanism that partially secures loans. Páscoa and Seghir (2009) presented two examples in which they argued that Ponzi schemes may reappear if, additionally to the seizure of the collateral, there are sufficiently harsh default penalties assessed (directly in terms of utility) against the defaulters. Moreover, they claimed that if default penalties are moderate then Ponzi schemes are ruled out and existence of a competitive equilibrium is restored. This paper questions the validity of the claims made in Páscoa and Seghir (2009). First, we show that it is not true that harsh default penalties lead to Ponzi schemes in the examples they have proposed. A competitive equilibrium with no trade can be supported due to unduly pessimistic expectations on asset deliveries. We subsequently refine the equilibrium concept in the spirit of Dubey, Geanakoplos and Shubik (2005) in order to rule out spurious inactivity on asset markets due to irrational expectations. Our second contribution is to provide a specific example of an economy with moderate default penalties in which Ponzi schemes reappear when overpessimistic beliefs on asset deliveries are ruled out. Our finding shows that, contrary to what is claimed by Páscoa and Seghir (2009), moderate default penalties do not always prevent agents to run a Ponzi scheme.

PERIODIC PERTURBATION of QUADRATIC SYSTEMS WITH TWO INFINITE HETEROCLINIC CYCLES

Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq)

Optimality conditions for infinite horizon control problems with state constraints

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)

Kinematics of a spacetime with an infinite cosmological constant

A solution of the sourceless Einstein's equation with an infinite value for the cosmological constant L is discussed by using Inonu-Wigner contractions of the de Sitter groups and spaces. When Lambda --> infinity, spacetime becomes a four-dimensional cone, dual to Minkowski space by a spacetime inversion. This inversion relates the four-cone vertex to the infinity of Minkowski space, and the four-cone infinity to the Minkowski light-cone. The non-relativistic limit c --> infinity. is further considered, the kinematical group in this case being a modified Galilei group in which the space and time translations are replaced by the non-relativistic limits of the corresponding proper conformal transformations. This group presents the same abstract Lie algebra as the Galilei group and can be named the conformal Galilei group. The results may be of interest to the early Universe Cosmology.

Infinite symmetries in the Skyrme model

We show that the Skyrme theory possesses a submodel with an infinite number of local conserved currents. The constraints leading to the submodel explore a decomposition of SU(2) with a complex field parametrizing the symmetric space SU(2)/U(1) and a real field in the direction of U(1). We demonstrate that the Skyrmions of topological charges ii belong to such integrable sector of the theory. Our results open ways to the development of exact methods, compensating for the non-existence of a BPS type sector in the Skyrme theory. (C) 2001 Published by Elsevier B.V. B.V.

Stability results for impulsive functional differential equations with infinite delay

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)

On the value function for nonautonomous optimal control problems with infinite horizon

In this paper we consider nonautonomous optimal control problems of infinite horizon type, whose control actions are given by L-1-functions. We verify that the value function is locally Lipschitz. The equivalence between dynamic programming inequalities and Hamilton-Jacobi-Bellman (HJB) inequalities for proximal sub (super) gradients is proven. Using this result we show that the value function is a Dini solution of the HJB equation. We obtain a verification result for the class of Dini sub-solutions of the HJB equation and also prove a minimax property of the value function with respect to the sets of Dini semi-solutions of the HJB equation. We introduce the concept of viscosity solutions of the HJB equation in infinite horizon and prove the equivalence between this and the concept of Dini solutions. In the Appendix we provide an existence theorem. (c) 2006 Elsevier B.V. All rights reserved.

On the existence of infinite heteroclinic cycles in polynomial systems and its dynamic consequences

In this work we consider the dynamic consequences of the existence of infinite heteroclinic cycle in planar polynomial vector fields, which is a trajectory connecting two saddle points at infinity. It is stated that, although the saddles which form the cycle belong to infinity, for certain types of nonautonomous perturbations the perturbed system may present a complex dynamic behavior of the solutions in a finite part of the phase plane, due to the existence of tangencies and transversal intersections of their stable and unstable manifolds. This phenomenon might be called the chaos arising from infinity. The global study at infinity is made via the Poincare Compactification and the argument used to prove the statement is the Birkhoff-Smale Theorem. (c) 2004 WILEY-NCH Verlag GmbH & Co. KGaA, Weinheim.

Analysis of electric torque in single machine-infinite bus system using phase shifters

ResumoThe main idea of this work is based on the analysis of the electric torque through the acting of the PS in the power system, provided of a control for the compensation degree (PSC). A linear model of the single machine-infinite bus system is used with a PS installed (SMIB/PS system). The variable that represents the presence of PS in the net is associated to the phase displacement introduced in the terminal voltage of the synchronous machine by PS. For the input signals of the PSC are evaluated variations of the angular speed of the rotor, the current magnitude and the active power through the line where the PS is located. The simulations are accomplished to analyze the influence of the PS in the torque formation (synchronizing and damping), of the SMIB/PS system. The analysis are developed in the time and frequency domain.

A maximum principle for infinite time asymptotically stable impulsive dynamic control systems

We consider an infinite horizon optimal impulsive control problems for which a given cost function is minimized by choosing control strategies driving the state to a point in a given closed set C ∞. We present necessary conditions of optimality in the form of a maximum principle for which the boundary condition of the adjoint variable is such that non-degeneracy due to the fact that the time horizon is infinite is ensured. These conditions are given for conventional systems in a first instance and then for impulsive control problems. They are proved by considering a family of approximating auxiliary interval conventional (without impulses) optimal control problems defined on an increasing sequence of finite time intervals. As far as we know, results of this kind have not been derived previously. © 2010 IFAC.

Necessary conditions of optimality for state constrained infinite horizon differential inclusions

This article presents and discusses necessary conditions of optimality for infinite horizon dynamic optimization problems with inequality state constraints and set inclusion constraints at both endpoints of the trajectory. The cost functional depends on the state variable at the final time, and the dynamics are given by a differential inclusion. Moreover, the optimization is carried out over asymptotically convergent state trajectories. The novelty of the proposed optimality conditions for this class of problems is that the boundary condition of the adjoint variable is given as a weak directional inclusion at infinity. This improves on the currently available necessary conditions of optimality for infinite horizon problems. © 2011 IEEE.

A maximum principle for constrained infinite horizon dynamic control systems

This article presents and discusses a maximum principle for infinite horizon constrained optimal control problems with a cost functional depending on the state at the final time. The main feature of these optimality conditions is that, under reasonably weak assumptions, the multiplier is shown to satisfy a novel transversality condition at infinite time. It is also shown that these conditions can also be obtained for impulsive control problems whose dynamics are given by measure driven differential equations. © 2011 IFAC.