Endogenous Collateral

Mário Páscoa, Aloisio Araujo and José Fajardo ()

No 161, Econometric Society 2004 Latin American Meetings from Econometric Society

Abstract: We study an economy where there are two types of assets. Consumers' promises are the primitive defaultable assets secured by collateral chosen by the consumers themselves. The purchase of these personalized assets by ¯- nancial intermediaries is ¯nanced by selling back derivatives to consumers. We show that nonarbitrage prices of primitive assets are strict submartin- gales, whereas nonarbitrage prices of derivatives are supermartingales. Next we establish existence of equilibrium, without imposing bounds on short sales. The nonconvexity of the budget set is overcome by considering a continuum of agents

Keywords: Endogenous; collateral (search for similar items in EconPapers)
JEL-codes: D52 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Endogenous collateral (2005)
Working Paper: Endogenous Collateral (2004)
Working Paper: Endogenous collateral (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:latm04:161

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