Many assets derive their value not only from future cash flows but also from their ability to serve as collateral. In … this paper, we investigate this collateral value and its impact on asset returns in an infinite-horizon general equilibrium … model with heterogeneous agents facing collateral constraints for borrowing. We document that borrowing against collateral …

We review the theory of leverage developed in collateral equilibrium models with incomplete markets. We explain how …-sectional implications of multiple leverage cycles, including contagion, flight to collateral, and swings in the issuance volume of the …