that all debts must be cleared by the end of the day. In such a way, the current unpaid liabilities may be paid at a future time, but before the terminal time. That is, a firm can be considered in *distress* at a time if it is unable to satisfy its obligations at that time, but only *defaults* if it has negative wealth at the terminal time. Thus in this paper we primarily focus on the intra-day dynamics rather than the inter-day dynamics. See Figure \[fig:discrete-BS\] for a stylized (snapshot of the) balance sheet example for a firm that has positive wealth at time $0$ that rolls forward to time $1$. The full (actualized) balance sheet for this example with only those two time periods is displayed in Figure \[fig:BS\]; we note that the full balance sheet as depicted considers actualized payments rather than the book value of the obligations.

To incorporate the inter-day dynamics in this framework we can “zero out” a firm before the terminal date if it is deemed to default in much the same as in [@banerjee2017insurance]. A broader framework for dealing with various default mechanisms is discussed in Remark \[rem:loans\]. We can further consider the 