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After the short temporary popularity of foreign currency denominated (FXD) loans, during the Great Financial and … determine the optimal size for domestic and foreign currency denominated loans, respectively. …
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We propose a model of a risky mortgage-lending market in which we take explicit account of heterogeneity in household borrowing conditions, by introducing two borrower types: one with a low loan-to-value (LTV) ratio, one with a high LTV ratio, calibrated to U.S. data. We use such framework to...
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We build a competitive equilibrium model of securitization in the presence of demand for safety by some investors … demand for safety leads to a securitization boom and riskier originated loans. When demand for safety is high, welfare is … expansions driven by demand for safety may, paradoxically, lead to riskier loan issuance than expansions driven by standard …
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