I model an incomplete markets economy where unaware agents do not perceive all states of nature, so unintended default … can occur when asset returns differ from what was perceived. The presence of default plays a crucial role in the proof of … delivery-adjusted asset returns. The First Fundamental Welfare Theorem fails because of default and pecuniary inefficiencies …

-spread default affects the banking system. We find that the interaction of credit, asset prices, and loan losses explains a complete … deteriorate, an asset price decline causes default among leveraged firms, and banks suffer loan losses. Their size determines …

falling asset prices affect the banking system through wide-spread borrower default, while deriving explicit solutions and … through’ the bank balance sheet; once borrowers default, asset prices drive bank capital, and constrained credit in turn …

falling asset prices affect the banking system through wide-spread borrower default, while deriving explicit solutions and … 'passes through' the bank balance sheet; once borrowers default, asset prices drive bank capital, and constrained credit in …