Does securitization distort the foreclosure decisions of non-performing mortgages? In a model of mortgage-backed securitization with an endogenous foreclosure policy, we find that the securitizing bank adopts a tougher foreclosure policy than the first-best, despite resulting in higher loan...

We consider a model in which dealers intermediate trades between clients and provide immediacy, or, market liquidity. Dealers can exert unobservable effort to improve the chance of intermediating profitably. This moral-hazard friction impairs dealers' ability to raise external finance and hence...

How does securitisation distort the foreclosure decision of non-performing mortgages? In a model in which informed securitisers raise liquidity by jointly designing the mortgage-backed security and the foreclosure policy, the authors find that securitisers optimally adopt an excessive...

This paper studies the benefits of central clearing and the design of a central counterparty (CCP) with an optimal contracting approach. Investors sign contracts to hedge an underlying exposure. There is counterparty risk because investors can default on the contract due to idiosyncratic shocks...