Introducing default and limited collateral into general equilibrium theory (GE) allows for a theory of endogenous … asset may default, its drop in price may be much greater than its objective drop in value because the drop in value reduces … information also shortens the horizon over which the asset might default, its price falls still further because the margin …

subsequently materialize. Introducing default and limited collateral into general equilibrium theory (GE) allows for a theory of …The possibility of default limits available liquidity. If the potential default draws nearer, a liquidity crisis may … ensue, causing a crash in asset prices, even if the probability of default barely changes, and even if no defaults …

goods, collateralized securities and the possibility of default to argue that the reliance on collateral to secure loans and …Much of the lending in modern economies is secured by some form of collateral: residential and commercial mortgages and … the particular collateral requirements chosen by the social planner or by the market have a profound impact on prices …

serving as collateral. Our Binomial No-Default Theorem states that any equilibrium is equivalent (in real allocations and … equilibria would be selected if there were the slightest cost of using collateral or handling default. Our Binomial Leverage …Our paper provides a complete characterization of leverage and default in binomial economies with financial assets …

We extend the standard model of general equilibrium with incomplete markets to allow for default and punishment. The … for asset trade. We show that more lenient punishment which encourages default may be Pareto improving because it allows … for better risk spreading. We also show that default opens the door to a theory of endogenous assets. …

In our previous paper we built a general equilibrium model of default and punishment in which equilibrium always exists … sales constraints as equilibrium signals. By specializing the default penalties and imposing an exclusivity constraint on …

We extend the standard model of general equilibrium with incomplete markets to allow for default and punishment by … compute how the size of their loan or the price they quote might affect default rates. It also makes for a simple equilibrium … equilibrium always exists in our model, and that default, in conjunction with refinement, opens the door to a theory of endogenous …

We extend the standard model of general equilibrium with incomplete markets (GEI) to allow for default. The … equilibrating variables include aggregate default levels, as well as prices of assets and commodities. Default can be either … penalties lambda for default, and the limitations Q on its sale. The model is thus named GE(A,lambda,Q). Each asset is regarded …