Figure 4 - available via license: Creative Commons Attribution 4.0 International
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Solution after defaulting. Panel A plots the scaled value function after defaulting v D pt, sq; it is related to the unscaled value function through equation (17). Panel B plots the optimal allocation to stocks after defaulting.
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We build a state-of-the-art dynamic model of private asset allocation that considers five key features of private asset markets: (1) the illiquid nature of private assets, (2) timing lags between capital commitments, capital calls, and eventual distributions, (3) time-varying business cycle conditions, (4) serial correlation in observed private ass...
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