the cost of ex-post inefficiency when there are adverse aggregate shocks to the fundamental quality of collateral … shocks by engaging in collateral liquidations. Financial arbitrage by less leveraged financial intermediaries equilibrates … returns from acquiring collateral at fire-sale prices and returns from real-sector lending, inducing higher lending rates, a …

informing policymakers and researchers about firm-level and systemic risk. We start by explaining the functioning of these …: principal amount, interest rate, collateral type, haircut, tenor, and counterparty …

The amount of information produced about firms' productivities and about the quality of collateral backing their loans … information about collateral depreciates. A financial crisis happens when information about collateral is suddenly generated …

. However, in a Lucas-tree world, the aggregate risk is given by the process for GDP and cannot be altered by the creation of … will be nil. With heterogeneity in coefficients of relative risk aversion, safe assets can take the form of private bond … issues from low-risk-aversion to high-risk-aversion agents. The model assumes Epstein-Zin/Weil preferences with common values …

collateral requirements and subordination of OTC positions in bankruptcy can ameliorate the counterparty risk externality, they … that parties take on short OTC positions that lead to levels of default risk that are higher than Pareto-efficient ones. In … particular, OTC markets feature a "counterparty risk externality" that we show can lead to ex-ante productive inefficiency. This …

economy tends to damage risk sharing when the composition of collateral is biased toward private assets. As we show that a … stable economy is more propitious to the creation of private collateral, stability makes risk sharing increasingly fragile to … valuation of collateral. Both private and public assets are used in insurance markets as collateral, but their exposure to …

collateral is scarce, regional consumption growth is about twice as sensitive to income growth. Household-level borrowing … frictions can explain this new stylized fact. When the value of housing relative to human wealth falls, loan collateral shrinks …, borrowing (risk-sharing) declines, and the sensitivity of consumption to income increases. Our model aggregates heterogeneous …