Not-too-tight (NTT) debt limits are endogenous restrictions on debt that prevent agents from defaulting and opting for a specified continuation utility, while allowing for maximal credit expansion (Alvarez and Jermann, 2000). For an agent facing some fixed prices for the Arrow securities, we...

We present some complementary results to Bidian and Bejan (2012). Part 1 provides necessary and sufficient transversality conditions for an agent's optimization problem. They are extensions to stochastic environments of the conditions given by Kocherlakota (1992), or alternatively, extensions to...