Strategic default behavior suggests that the default process is not only a matter of inability to pay. Economic costs and benefits affect the incidence and timing of defaults. As with prior research, the authors find that people default strategically as their home value falls below the mortgage...

This paper studies economies with complete markets where there is positive default on consumer debt. In a simple tractable two-period model, households can default partially, at a finite punishment cost, and competitive intermediaries price loans of different sizes separately. This environment...

Bharath and Shumway (2008) provide evidence that shows that it is the functional form of Merton’s (1974) distance to default (DD) model that makes it useful and important for predicting defaults. In this paper, we investigate whether the default predictability of the Merton DD model would be...

This paper investigates the influence of expected foreclosure duration on a borrower's future default propensity. We use the lagged actual time-varying state-level foreclosure times as proxies for borrower's expected benefit from default as the form of "free rent.'' While existing literature...

This paper analyzes lenders' pricing strategies in the business-to-customer (B2C) unsecured loan market by using a proprietary dataset of approximately 3 million unsecured consumer loans from a B2C online retailer in China. We find that lenders' decisions to invite customers are based on...