publication . Article . Other literature type . 2012 . Embargo end date: 01 Jan 1970

Regulating collateral-Requirements when markets are incomplete

Kübler, Felix; Araujo, Aloisio; Schommer, Susan;
Open Access English
  • Published: 01 Jan 2012
  • Publisher: Elsevier
Abstract
In this paper we examine the effects of default and scarcity of collateralizable durable goods on risk-sharing. We assume that there is a large set of assets which all promise a risk-less payo but which distinguish themselves by the collateral requirement. In equilibrium agents default and the assets have dierent payoffs. Assets with very low collateral requirements can be interpreted as sub-prime loans and these assets are often traded actively in the competitive equilibrium. If there is an abundance of commodities that can be used as collateral and if each agent owns a large fraction of these commodities, markets are complete and competitive equilibrium ...
Subjects
free text keywords: 330 Economics, Department of Banking and Finance
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publication . Article . Other literature type . 2012 . Embargo end date: 01 Jan 1970

Regulating collateral-Requirements when markets are incomplete

Kübler, Felix; Araujo, Aloisio; Schommer, Susan;