Screening in the credit market when the collateral value is stochastic
Niinimäki, Juha-Pekka (01.07.2009)
Numero
19/2009Julkaisija
Bank of Finland
2009
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-20140807582Tiivistelmä
This theoretical paper explores screening with loan collateral when both the collateral value and the probability of project success fluctuate. Some model versions challenge the classic findings of Bester (1985) by showing that high-risk borrowers may in such case be more willing to pledge collateral than low-risk borrowers. Abundant collateral then would not signal low risk. The results may help explain the mixed empirical findings on the role of collateral. The paper also extends the analysis of the topical subprime crises and risky real estate collateral
Julkaisuhuomautus
Published in Journal of Banking & Finance, Volume 35, Issue 10, October 2011: 2782-2790