Collateral, default penalties and almost finite-time solvency

dc.contributor.affiliationFGV
dc.contributor.authorMartins-da-Rocha, Victor Filipe
dc.contributor.authorVailakis, Yiannis
dc.contributor.unidadefgvEscolas::EPGEpor
dc.date.accessioned2008-05-13T15:23:46Z
dc.date.available2008-05-13T15:23:46Z
dc.date.issued2008-03-04
dc.description.abstractWe argue that it is possible to adapt the approach of imposing restrictions on available plans through finitely effective debt constraints, introduced by Levine and Zame (1996), to encompass models with default and collateral. Along this line, we introduce in the setting of Araujo, Páscoa and Torres-Martínez (2002) and Páscoa and Seghir (2008) the concept of almost finite-time solvency. We show that the conditions imposed in these two papers to rule out Ponzi schemes implicitly restrict actions to be almost finite-time solvent. We define the notion of equilibrium with almost finite-time solvency and look on sufficient conditions for its existence. Assuming a mild assumption on default penalties, namely that agents are myopic with respect to default penalties, we prove that existence is guaranteed (and Ponzi schemes are ruled out) when actions are restricted to be almost finite-time solvent. The proof is very simple and intuitive. In particular, the main existence results in Araujo et al. (2002) and Páscoa and Seghir (2008) are simple corollaries of our existence result.eng
dc.identifier.issn0104-8910
dc.identifier.urihttps://hdl.handle.net/10438/415
dc.language.isoeng
dc.publisherEscola de Pós-Graduação em Economia da FGVpor
dc.relation.ispartofseriesEnsaios Econômicos;670por
dc.subjectInfinite horizon economiespor
dc.subjectIncomplete marketspor
dc.subjectDebt constraintspor
dc.subjectDefaultpor
dc.subjectCollateralpor
dc.subjectPonzi schemespor
dc.subject.areaEconomiapor
dc.subject.bibliodataEconomiapor
dc.titleCollateral, default penalties and almost finite-time solvencyeng
dc.typeWorking Papereng
Arquivos
Pacote Original
Agora exibindo 1 - 1 de 1
Carregando...
Imagem de Miniatura
Nome:
2288.pdf
Tamanho:
271.91 KB
Formato:
Adobe Portable Document Format