000			01434nam a22001577a 4500
999			_c516524 _d516524
008			210226b ||||| |||| 00| 0 eng d
100			_aCao, Dan and Lagunoff, Roger _925705
245			_aOptimal collateralized contracts
260			_aAmerican Economic Journal: Microeconomics
300			_a12(4), Nov, 2020: p.45-74
520			_aWe examine the role of collateral in a dynamic model of optimal credit contracts in which a borrower values both housing and nonhousing consumption. The borrower's private information about his income is the only friction. An optimal contract is collateralized when in some state, some portion of the borrower's net worth is forfeited to the lender. We show that optimal contracts are always collateralized. The total value of forfeited assets is decreasing in income, highlighting the role of collateral as a deterrent to manipulation. Some assets—those that generate consumable services—will necessarily be collateralized, while others may not be. Endogenous default arises when the borrower's initial wealth is low, as with subprime borrowers, and/or his future earnings are highly variable. – Reproduced
650			_aEconomics of Contract, Banks, Depository institutions, Micro Finance Institutions; Mortgages, Household Finance, Household Saving, Borrowing, Debt, Wealth _925706
773			_aAmerican Economic Journal: Microeconomics
906			_aBANKING AND FINANCE
942			_cAR