Arbeitspapier

General equilibrium existence with asset-backed securitization

We propose a specification of a general equilibrium model with securitization of collateral-backed promises and discuss the role of physical collateral to avoid, in equilibrium, pessimistic beliefs about the future rates of default. Promises are pooled in either pass-through securities or collateralized loans obligations (CLO), allowing the existence of different seniority lev- els among tranches in the same CLO. In case of default, borrowers may also suffer extra-economic penalties, which are internalized into a structure of non-ordered preferences. In this context, we prove the existence of an equilibrium in that investors are not over-pessimistic about the payments of derivatives. JEL Codes: D52, D91

Language
Englisch

Bibliographic citation
Series: Texto para discussão ; No. 490

Classification
Wirtschaft
Subject
Asset Backed-Securitization
Extra-economic Default Penalties
Collateral
Non- ordered Preferences

Event
Geistige Schöpfung
(who)
Steinert, Mariano
Torres-Martínez, Juan Pablo
Event
Veröffentlichung
(who)
Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia
(where)
Rio de Janeiro
(when)
2004

Handle
Last update
10.03.2025, 11:43 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Steinert, Mariano
  • Torres-Martínez, Juan Pablo
  • Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia

Time of origin

  • 2004

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