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Equilibrium with limited-recourse collateralized loans

  • Rubén Poblete-Cazenave
  • Juan Pablo Torres-Martínez

We address a general equilibrium model with limited-recourse collateralized loans. Borrowers are burden to constitute physical collateral guarantees, which are repossessed in case of default and delivered to the associated lenders. In addition, lenders may receive payments over collateral values, since debtor's wealth (physical and financial) can be garnished when commitments are not fully honored. The reimbursement of resources is proportional to the size of claims.

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File URL: http://www.econ.uchile.cl/uploads/publicacion/01888b8058451586610ac4b23c3c7b6b101e1eaa.pdf
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Paper provided by University of Chile, Department of Economics in its series Working Papers with number wp313.

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Length: 25 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:udc:wpaper:wp313
Contact details of provider: Web page: http://www.econ.uchile.cl/

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  1. Magill, M. & Quinzii, M., 1992. "Infinite Horizon Incomplete Markets," Papers 413a, California Davis - Institute of Governmental Affairs.
  2. William R. Zame, 1992. "Efficiency and the Role of Default When Security Markets are Incomplete," UCLA Economics Working Papers 673, UCLA Department of Economics.
  3. Florenzano, M. & Gourdel, P., 1994. "Incomplete Markets in Infinite Horizon: Debt Constraints Versus Node Prices," Papiers d'Economie Mathématique et Applications 94.76, Université Panthéon-Sorbonne (Paris 1).
  4. 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.
  5. Steinert, Mariano & Torres-Martinez, Juan Pablo, 2007. "General equilibrium in CLO markets," Journal of Mathematical Economics, Elsevier, vol. 43(6), pages 709-734, August.
  6. Weerachart Kilenthong, 2011. "Collateral premia and risk sharing under limited commitment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 46(3), pages 475-501, April.
  7. Araujo, Aloisio. & Fajardo, J. & Páscoa. M. R., 2004. "Endogenous Collateral," Finance Lab Working Papers flwp_68, Finance Lab, Insper Instituto de Ensino e Pesquisa.
  8. Álvaro Riascos Villegas & Juan Pablo Torres-Martínez, 2010. "A Direct Proof of the Existence of Pure Strategy Equilibria in Large Generalized Games with Atomic Players," DOCUMENTOS CEDE 007091, UNIVERSIDAD DE LOS ANDES-CEDE.
  9. Pradeep Dubey & John Geanakoplos & Martin Shubik, 2005. "Default and Punishment in General Equilibrium," Econometrica, Econometric Society, vol. 73(1), pages 1-37, 01.
  10. Martins-da-Rocha, Victor Filipe & Vailakis, Yiannis, 2008. "Collateral, default penalties and almost finite-time solvency," Economics Working Papers (Ensaios Economicos da EPGE) 670, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  11. Timothy J Kehoe & David K Levine, 1993. "Debt Constrained Asset Markets," Levine's Working Paper Archive 1276, David K. Levine.
  12. 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.
  13. Petrassi, Myrian & Torres-Marti­nez, Juan Pablo, 2008. "Collateralized assets and asymmetric information," Journal of Mathematical Economics, Elsevier, vol. 44(5-6), pages 530-534, April.
  14. Victor Filipe Martins da Rocha & Yiannis Vailakis, 2012. "Harsh default penalties lead to Ponzi schemes: A counterexample," Post-Print hal-00664552, HAL.
  15. Abdelkrim Seghir & Juan Torres-Martínez, 2008. "Wealth transfers and the role of collateral when lifetimes are uncertain," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 36(3), pages 471-502, September.
  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. Aloisio Araújo & Jaime Orrillo & Mario R. Páscoa, 2000. "Equilibrium with Default and Endogenous Collateral," Mathematical Finance, Wiley Blackwell, vol. 10(1), pages 1-21.
  18. 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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