| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 5098502 | Journal of Economic Dynamics and Control | 2014 | 31 Pages |
Abstract
To motivate the limited use of contingent contracts, we introduce costs of issuing contingent debt and calibrate them to match the liquidity and safety premia the data. We find that realistic costs of state contingent market participation can rationalize the predominant use of uncontingent debt. Amplification is restored in such an environment.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Kalin Nikolov,