Iraola, Miguel A.; Torres-Martínez, Juan Pablo - In: Journal of Mathematical Economics 55 (2014) C, pp. 113-122
We address a general equilibrium model with collateralized debt, credit contractions, and financial market segmentation. Restrictions on credit access make borrower’s optimal payment strategies–coupon payment, prepayment, and default–sensitive to idiosyncratic factors, even though the only...