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Equilibrium with limited-recourse collateralized loans


We address a general equilibrium model with limited-recourse collateralized loans and securitization of debts. Each borrower is required to pledge physical collateral, and bankruptcy is filed against him if claims are not fully honored. Moreover, agents have a positive amount of wealth exempt from garnishment and, for at least a fraction of them, commodities used as collateral are desirable. In this context, equilibrium exists for any continuous garnishment rule and multiple types of reimbursement mechanisms.

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Corresponding author

Correspondence to Juan Pablo Torres-Martínez.

Additional information

The authors want to thank an Associated Editor and four anonymous referees for suggestions that improved the paper. Also, we are grateful to Abdelkrim Seghir and Victor Filipe Martins-da-Rocha for their useful comments. R. Poblete-Cazenave acknowledges financial support from University of Chile through a graduate fellowship. J.P. Torres-Martínez is grateful to Conicyt (Chilean Research Council) for their financial support through the Fondecyt project 1090206.

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Poblete-Cazenave, R., Torres-Martínez, J.P. Equilibrium with limited-recourse collateralized loans. Econ Theory 53, 181–211 (2013).

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  • Collateralized assets
  • Bankruptcy
  • Limited-recourse loans

JEL Classification

  • D52
  • D54