A life-cycle model with equilibrium default in which consumers with and without temptation coexist is constructed to … default premia and better consumption smoothing. However, those who borrow and default due to temptation or unavoidable large …

I construct the life-cycle model with equilibrium default and preferences featuring temptation and self-control. The … effect is positive in the no-temptation model. As for the optimal default punishment, welfare of the agents without … lower default premium. On the other hand, welfare of agents with temptation is maximized when weak punishment leads to a …

affected lenders’ decisions to grant mortgages and borrowers’ decisions to apply for them and subsequently default. Using … change. Furthermore, the law change did not appear to have affected borrowers’ default decisions. These results cast a …

. Specifically, we focus on models of default and loss and analyze three important sources of model risk: model selection, model … Great Recession may fail to project default rates, or loss rates, consistent with those experienced during the Great …