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Equilibrium with limited-recourse collateralized loans

  • Rubén Poblete-Cazenave

    ()

  • Juan Torres-Martínez

    ()

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

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File URL: http://hdl.handle.net/10.1007/s00199-011-0685-8
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 53 (2013)
Issue (Month): 1 (May)
Pages: 181-211

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Handle: RePEc:spr:joecth:v:53:y:2013:i:1:p:181-211
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  1. Abdelkrim Seghir & Juan Torres-Martínez, 2008. "Wealth transfers and the role of collateral when lifetimes are uncertain," Economic Theory, Springer, vol. 36(3), pages 471-502, September.
  2. Felipe Martins-da-Rocha & Yiannis Vailakis, 2008. "Collateral, default penalties and almost finite-time solvency," Levine's Working Paper Archive 122247000000002049, David K. Levine.
  3. Monique Florenzano & Pascal Gourdel, 1996. "Incomplete Markets In Infinite Horizon: Debt Constraints Versus Node Prices," Mathematical Finance, Wiley Blackwell, vol. 6(2), pages 167-196.
  4. P. Dubey & J. Geanakoplos & M . Shubik, 2001. "Default and Punishment in General Equilibrium," Department of Economics Working Papers 01-07, Stony Brook University, Department of Economics.
  5. Martins-da-Rocha, Victor-Filipe & Vailakis, Yiannis, 2012. "Harsh default penalties lead to Ponzi schemes: A counterexample," Economics Papers from University Paris Dauphine 123456789/8093, Paris Dauphine University.
  6. Magill, M. & Quinzii, M., 1993. "Infinite Horizon Incomplete Markets," Papers 9320, Southern California - Department of Economics.
  7. William R. Zame, 1990. "Efficiency and the Role of Default When Security Markets are Incomplete," UCLA Economics Working Papers 585, UCLA Department of Economics.
  8. Myrian Petrassi & Juan Pablo Torres-Martinez, 2007. "Collateralized Assets And Asymmetric Information," Textos para discussão 539, Department of Economics PUC-Rio (Brazil).
  9. Kehoe, Timothy J & Levine, David K, 1993. "Debt-Constrained Asset Markets," Review of Economic Studies, Wiley Blackwell, vol. 60(4), pages 865-88, October.
  10. Araujo, Aloisio. & Fajardo, J. & Páscoa. M. R., 2004. "Endogenous Collateral," Finance Lab Working Papers flwp_68, Finance Lab, Insper Instituto de Ensino e Pesquisa.
  11. Weerachart Kilenthong, 2011. "Collateral premia and risk sharing under limited commitment," Economic Theory, Springer, vol. 46(3), pages 475-501, April.
  12. Steinert, Mariano & Torres-Martinez, Juan Pablo, 2007. "General equilibrium in CLO markets," Journal of Mathematical Economics, Elsevier, vol. 43(6), pages 709-734, August.
  13. Martins-da-Rocha, V. Filipe & Vailakis, Yiannis, 2012. "Endogenous debt constraints in collateralized economies with default penalties," Journal of Mathematical Economics, Elsevier, vol. 48(1), pages 1-13.
  14. Balder, Erik J., 1999. "On the existence of Cournot-Nash equilibria in continuum games," Journal of Mathematical Economics, Elsevier, vol. 32(2), pages 207-223, October.
  15. Aloisio Ara�jo & Jaime Orrillo & Mario R. Páscoa, 2000. "Equilibrium with Default and Endogenous Collateral," Mathematical Finance, Wiley Blackwell, vol. 10(1), pages 1-21.
  16. Sabarwal Tarun, 2003. "Competitive Equilibria With Incomplete Markets and Endogenous Bankruptcy," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 3(1), pages 1-42, January.
  17. Hernandez D., Alejandro & Santos, Manuel S., 1996. "Competitive Equilibria for Infinite-Horizon Economies with Incomplete Markets," Journal of Economic Theory, Elsevier, vol. 71(1), pages 102-130, October.
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