Debt Portfolios

Thomas Hintermaier and Winfried Koeniger

No 646, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: We provide a model with endogenous portfolios of secured and unsecured household debt. Secured debt is collateralized by durables whereas unsecured debt can be discharged in bankruptcy procedures. We show that the model matches the main quantitative characteristics of observed wealth and debt portfolios in the US and some of the observed changes over time. Furthermore, we establish two quantitative results. Firstly, modest levels of risk aversion are necessary to match observed debt portfolios. Secondly, durables do not improve consumers' access to unsecured credit, and plausible variations of durable exemptions in bankruptcy procedures have very small effects on the equilibrium.

Keywords: Household debt portfolios; Durables; Collateral; Income risk; Bankruptcy (search for similar items in EconPapers)
JEL-codes: D91 E21 (search for similar items in EconPapers)
Date: 2009-06-01
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Debt Portfolios (2011)
Working Paper: Debt Portfolios (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:646

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