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Equilibrium with limited-recourse collateralized loans

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  • Rubén Poblete-Cazenave

    ()

  • Juan Torres-Martínez

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Abstract

We address a general equilibrium model with limited-recourse collateralized loans and securitization of debts. Each borrower is required to pledge physical collateral, and bankruptcy is filed against him if claims are not fully honored. Moreover, agents have a positive amount of wealth exempt from garnishment and, for at least a fraction of them, commodities used as collateral are desirable. In this context, equilibrium exists for any continuous garnishment rule and multiple types of reimbursement mechanisms. Copyright Springer-Verlag 2013

Suggested Citation

  • Rubén Poblete-Cazenave & Juan Torres-Martínez, 2013. "Equilibrium with limited-recourse collateralized loans," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(1), pages 181-211, May.
  • Handle: RePEc:spr:joecth:v:53:y:2013:i:1:p:181-211 DOI: 10.1007/s00199-011-0685-8
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    References listed on IDEAS

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    Cited by:

    1. Iraola, Miguel A. & Torres-Martínez, Juan Pablo, 2014. "Equilibrium in collateralized asset markets: Credit contractions and negative equity loans," Journal of Mathematical Economics, Elsevier, vol. 55(C), pages 113-122.
    2. Gregory Phelan, 2017. "Collateralized borrowing and increasing risk," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 471-502.
    3. Miguel A. Iraola & Juan Pablo Torres-Martinez, 2013. "Liquidity Contractions, Incomplete Financial Participation and the Prevalence of Negative Equity Non-Recourse Loans," Working Papers 2013-08, University of Miami, Department of Economics.
    4. Athanasios Geromichalos & Jiwon Lee & Seungduck Lee & Keita Oikawa, 2014. "Over-the-Counter Trade and the Value of Assets as Collateral," Working Papers 143, University of California, Davis, Department of Economics.
    5. Xavier Mateos-Planas & Giulio Seccia, 2013. "Consumer Default with Complete Markets: Default-based Pricing and Finite Punishment," Working Papers 711, Queen Mary University of London, School of Economics and Finance.
    6. Magill, Michael & Quinzii, Martine, 2015. "Prices and investment with collateral and default," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 111-132.

    More about this item

    Keywords

    Collateralized assets; Bankruptcy; Limited-recourse loans; D52; D54;

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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