Screening in the credit market when the collateral value is stochastic

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Title: Screening in the credit market when the collateral value is stochastic
ISBN: 978-952-462-522-7
978-952-462-523-4
Author: Niinimäki, Juha-Pekka
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2009
Series number: 19/2009
Year of publication: 2009
Publication date: 1.7.2009
Published in: Published in Journal of Banking & Finance, Volume 35, Issue 10, October 2011: 2782-2790
DOI: 10.1016/j.jbankfin.2011.03.008
Pages: 27 s.
Keywords: pankkitoiminta; vakuudet; riskit; luotot;
Abstract: 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
Rights: https://helda.helsinki.fi/bof/copyright


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