Credit risk in general equilibrium
This paper contributes to the literature on default in general equilibrium. Borrowing and lending takes place via a clearing house (bank) that monitors agents and enforces contracts. Our model develops a concept of bankruptcy equilibrium that is a direct generalization of the standard general equili...
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| Main Authors: | , , |
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| Format: | Article (Journal) |
| Language: | English |
| Published: |
14 June 2014
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| In: |
Economic theory
Year: 2014, Volume: 57, Issue: 2, Pages: 407-435 |
| ISSN: | 1432-0479 |
| DOI: | 10.1007/s00199-014-0822-2 |
| Online Access: | Verlag, lizenzpflichtig, Volltext: https://doi.org/10.1007/s00199-014-0822-2
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| Author Notes: | Jürgen Eichberger, Klaus Rheinberger, Martin Summer |
| Summary: | This paper contributes to the literature on default in general equilibrium. Borrowing and lending takes place via a clearing house (bank) that monitors agents and enforces contracts. Our model develops a concept of bankruptcy equilibrium that is a direct generalization of the standard general equilibrium model with financial markets. Borrowers may default in equilibrium and returns on loans are determined endogenously. Restricted to a special form of mean variance preferences, we derive a version of the capital asset pricing model with bankruptcy. In this case, we can characterize equilibrium prices and allocations and discuss implications for credit risk modeling. |
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| Item Description: | Gesehen am 17.07.2020 |
| Physical Description: | Online Resource |
| ISSN: | 1432-0479 |
| DOI: | 10.1007/s00199-014-0822-2 |