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 …

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 …

assets to be pledged as collateral. It is shown that the resulting optimal portfolio is not always tilted towards holding …

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

novating trades implements efficient trading behaviour. It is optimal for the CCP to face default losses to achieve the … efficient level of trade. To cover these losses, the CCP optimally uses margin calls, and, as the default problem becomes more … severe, also requires default funds and then imposes position limits. …

collateral to face value of the loan. Default results in foreclosure, higher borrowing costs, inefficient investment and a …This paper assesses the role that monetary policy plays in the decision to default using a General Equilibrium model … with collateralized loans, trade in fiat money and production. Long-term nominal loans are backed by collateral, the value …

. Players may share heterogenous beliefs. Short positions in derivatives are constrained by collateral requirements. A central …

backed by collateral, the value of which depends on monetary policy. The decision to default is endogenous and depends on the … relative value of the collateral to the loan. We show that Collateral Monetary Equilibria exist and prove there is also a … of monetary policy highlights the default channel affecting trades and production, and provides a rigorous foundation to …

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 …

Pascoa and Seghir (2009) noticed that when collateralized promises become subject to utility penalties on default … the collateral does not yield utility (for example, when it is a productive asset or a security). Equilibrium exists also … under more severe penalties and collateral utility gains, when the promise or the collateral are nominal assets and the …