About

Konstantin W. Milbradt is a Professor of Finance at the Kellogg School of Management, Northwestern University, where he also serves as Co-Director of the Guthrie Center. His research interests are in financial economics, specifically in how financial frictions influence asset prices, the macroeconomy, corporate decisions, and mortgage markets. His recent work involves both theoretical and empirical investigations into how heterogeneity in homeowner prepayment decisions affects mortgage market prices and monetary policy pass-through, as well as how different contract designs impact these prices. Milbradt holds a PhD from Princeton University and a BA from Oxford University. Prior to joining Kellogg in 2013, he was an Assistant Professor of Finance at the MIT Sloan School of Management. His academic positions include Associate Professor of Finance at Kellogg and Assistant Professor of Finance at MIT Sloan. His research has earned awards such as the Best Paper Award at the Utah Winter Finance Conference and the Best Paper Prize at the same conference. He has also served as an Associate Editor for the Review of Finance and has been a referee for numerous prestigious journals in economics and finance.

Research topics

• Economics
• Monetary economics
• Finance
• Political Science
• Financial system
• Business
• Actuarial science
• Microeconomics
• Macroeconomics

Selected publications

• Optimal Mortgage Refinancing with Inattention

  American Economic Review Insights · 2025-11-25 · 1 citations

  article

  We build a model of optimal fixed-rate mortgage refinancing with fixed costs and inattention and derive a new sufficient statistic that can be used to measure inattention frictions from simple moments of the rate gap distribution. In the model, borrowers pay attention to rates sporadically, so they often fail to refinance even when it is profitable. When paying attention, borrowers optimally choose to refinance earlier than under a perfect attention benchmark. Our model can rationalize almost all errors of “omission” (refinancing too slowly) and a large fraction of the errors of “commission” (refinancing too quickly) previously documented in the data. (JEL D91, G41, G51)

  PublisherDOI

• A Theory of Cash Flow-Based Financing with Distress Resolution

  The Review of Economic Studies · 2025-01-28 · 6 citations

  articleOpen accessSenior author

  Abstract We develop a dynamic contracting theory of asset- and cash flow-based financing that demonstrates how firm, intermediary, and capital market characteristics jointly shape firms’ financing constraints. A firm with imperfect access to equity financing covers financing needs through costly sources: an intermediary and retained cash. The firm’s financing capacity is endogenously determined by either the liquidation value of assets (asset-based) or the intermediary’s going-concern valuation of the firm’s cash flows (cash flow-based). The optimal contract is implemented with defaultable debt—specifically unsecured credit lines and senior-secured debt—and features risk-sharing via bankruptcy. When the firm does well, it repays its debt in full. When it does poorly, distress resolution mirrors U.S. bankruptcy procedures (Chapters 7 and 11). Secured and unsecured debt are complements because risk-sharing via unsecured debt increases secured debt capacity. Debt and equity are dynamic complements because future access to equity financing increases current debt capacity.

  PublisherDOI

• Refinancing Frictions, Mortgage Pricing and Redistribution

  SSRN Electronic Journal · 2024-01-01 · 3 citations

  articleOpen access
  PublisherDOI

• Refinancing Frictions, Mortgage Pricing and Redistribution

  National Bureau of Economic Research · 2024-01-01 · 9 citations

  reportOpen access

  There are large cross-sectional differences in how often US borrowers refinance mortgages.In this paper, we develop an equilibrium mortgage pricing model with heterogeneous borrowers and use it to show that equilibrium forces imply important cross-subsidies from borrowers who rarely refinance to those who refinance often.Mortgage reforms can potentially reduce these regressive cross-subsidies, but the equilibrium effects of these reforms can also have important distributional consequences.For example, many policies that lead to more frequent refinancing also increase equilibrium mortgage rates and thus reduce residential mortgage credit access for a large number of borrowers.

  PublisherDOI

• Refinancing Frictions, Mortgage Pricing and Redistribution

  SSRN Electronic Journal · 2024 · 10 citations

  • Political Science
  • Economics
  • Business
  PublisherDOI

• Optimal Mortgage Refinancing with Inattention

  SSRN Electronic Journal · 2024 · 1 citations

  • Business
  • Financial system
  • Economics
  PublisherDOI

• Optimal Mortgage Refinancing with Inattention

  SSRN Electronic Journal · 2024-01-01

  articleOpen access
  PublisherDOI

• Optimal Mortgage Refinancing with Inattention

  National Bureau of Economic Research · 2024-05-01 · 4 citations

  reportOpen access

  We build a model of optimal fixed-rate mortgage refinancing with fixed costs and inattention and derive a new sufficient statistic that can be used to measure inattention frictions from simple moments of the rate gap distribution.In the model, borrowers pay attention to rates sporadically so they often fail to refinance even when it is profitable.When paying attention, borrowers optimally choose to refinance earlier than under a perfect attention benchmark.Our model can rationalize almost all errors of "omission" (refinancing too slowly) and a large fraction of the errors of "commission" (refinancing too quickly) previously documented in the data.

  PublisherDOI

• Waiting for Capital with On-Demand Financing

  SSRN Electronic Journal · 2022-01-01

  articleOpen accessSenior author
  PublisherDOI

• Inattentive Households, Mortgage Redistribution, and Inequality

  CBS Research Portal (Copenhagen Business School) · 2022-06-01

  article

  There are large cross-sectional differences in how often US households choose to refinance their mortgage. Many of these choices appear to be sub-optimal, with households often losing out on thousands of dollars of potential savings. In this paper, we develop an equilibrium mortgage pricing model that allows us to explore the consequences of this heterogeneity in a pooling equilibrium, such as in the US conforming mortgage market. A key result is that because of the large cross-sectional differences in refinancing propensity, there are substantial cross-subsidies from “inattentive” to “attentive” households. We use the model to analyze policies to potentially address this redistribution, such as increasing attentiveness and mortgage contract design, and highlight the potential unintended consequences increasing attentiveness. Lastly, we discuss anovel channel to wealth inequality coming from the liability side of a household’s balance sheet.

  Publisher

Frequent coauthors

• Zhiguo He

  138 shared

• Rui Cui

  University of Chicago

  66 shared

• Hui Chen

  Guilin University of Electronic Technology

  64 shared

• Martin Oehmke

  London School of Economics and Political Science

  43 shared

• Joseph Vavra

  University of Chicago

  10 shared

• David Berger

  Duke University

  9 shared

• Fabrice Tourre

  Copenhagen Business School

  8 shared

• Arvind Krishnamurthy

  Stanford University

  7 shared

Awards & honors

• Best paper award Utah Winter Finance Conference "A model of…
• Best paper award Utah Winter Finance Conference "Endogenous…
• Best Paper Prize, Utah Winter Finance Conference