This paper analyses the effects of borrower-specific credit constraints on macroeconomic outcomes in an agent-based housing market model, calibrated using UK household survey data. We apply different Loan-to-Value (LTV) caps for types agents: first-time buyers, second and subsequent buy-to-let investors. then analyse debt, wealth inequality consumption volatility. The households’ function, inco...

The authors wish to thank John Kolla and Marvin Phaup for help and comments on this project. Lucas gratefully acknowledges support from the Searle Foundation. Working papers in this series are preliminary and are circulated to stimulate discussion and critical comment. They are not subject to CBO's formal review and editing processes. The analysis and conclusions expressed in them are those of ...

This paper develops a simple model based on an options approach to measure provisions covering expected losses of collateralised retail lending due to default. The dynamics of the probability of default of retail loans is allowed to follow a meanreverting random process, which captures the characteristics of an economic cycle. Based on the data of the residential mortgage market in Hong Kong, t...

In his paper, Professor Landsman reviews research on both the relevance and reliability of reporting fair values for loans and other financial instruments (Landsman (2005)). Accounting standard setters define fair value as the amount that would be paid or received for the item being valued in an arm’s length transaction between knowledgeable parties. This is a market value definition and the st...

Loan spreads are analysed for two types of loans. The …rst takes losses at maturity only; the second one follows the formulation of CFOs (Collateralized Fund Obligations), with losses registered over the lifetime of the contract. In both cases, the implementation requires the choice of a process for the underlying asset value and the identi…cation of the parameters. The parameters of the proces...

Abstract Recessions that are accompanied by financial crises tend to be more severe and are followed by slower recoveries than ordinary recessions. This paper introduces a new Keynesian model with financial frictions on both the demand and supply side of the credit markets that can explain this empirical finding. Following a shock that leads to a decline in economic activity, an adverse feedbac...

This paper calculates loan-by-loan estimates of commercial real estate implied volatility using all commercial mortgages in 206 public CMBS deals from 1996 through 2005 — a total of over 14,000 loans. The implied volatilities average about 20–24% per annum, with some differences across property types. Using these implied volatilities, we compute the distribution of default rates for representat...

We introduce a model to support scenario analysis while managing costs of high-tech project. If the project results from joint efforts firms with one per single stage suggests budget redistribution in case funding shortage or exchange rate volatility. Given negative outer effects for requires be completed and this constraint forces diminish their profit make loan if needed. The proposed human-m...

Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. Our Binomial No-Default Theorem states that any equilibrium is equivalent (in real allocations and prices) to another equilibrium in which there is no default. Thus actual default is irrelevant, though the potential for default drives the equilibrium and limi...

Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. Our Binomial No-Default Theorem states that any equilibrium is equivalent (in real allocations and prices) to another equilibrium in which there is no default. Thus actual default is irrelevant, though the potential for default drives the equilibrium and limi...