Redundant assets have complicated implications to equilibrium, when
available asset markets are subject to market frictions. We show the
existence of equilibrium in two-period asset markets where portfolio choices
are subject to portfolio constraints. The main consequences of the paper are
differentiated from the literature in two respects. First, asset markets are
allowed to have a large multiplicity of alternative portfolios in equilibrium. A
portfolio decomposition technique is developed to resolve the large
multiplicity problem. Second, we provide a survival condition with asset
markets for the existence of equilibrium. Remarkably, this cannot be
dispensed within the constrained asset markets, even when the endowment of
goods is in the interior of the consumption set for each agent.