I develop a dynamic agency model of financial contracting, where borrowing constraints appear as part of the optimal contract. The novelty of the paper relative to previous work is that volatility is stochastic and exogenous to the agent behavior. A line of credit appears in the optimal long...

We build a competitive equilibrium model of securitization in the presence of demand for safety by some investors. Securitization allows to create safe assets by pooling idiosyncratic risks from loan originators, leading to higher aggregate loan issuance. Yet, the distribution of loan risks out...