Adverse selection, reputation and sudden collapses in secondary loan markets / V.V. Chari, Ali Shourideh, Ariel Zetlin-Jones.
| Author/creator | Chari, V. V. |
| Other author | Shourideh, Ali. |
| Other author | Zetlin-Jones, Ariel. |
| Other author | National Bureau of Economic Research. |
| Format | Electronic |
| Publication Info | Cambridge, MA : National Bureau of Economic Research, |
| Supplemental Content | Full text available from NBER Working Papers |
| Series | NBER working paper series ; working paper 16080 Working paper series (National Bureau of Economic Research : Online) ; working paper no. 16080. UNAUTHORIZED |
| Summary | "Banks and financial intermediaries that originate loans often sell some of these loans or securitize them in secondary loan markets and hold on to others. New issuances in such secondary markets collapse abruptly on occasion, typically when collateral values used to secure the underlying loans fall. These collapses are viewed by policymakers as signs that the market is not functioning efficiently. In this paper, we develop a dynamic adverse selection model in which small reductions in collateral values can generate abrupt inefficient collapses in new issuances in the secondary loan market. In our model, reductions in collateral values worsen the adverse selection problem and induce some potential sellers to hold on to their loans. Reputational incentives induce a large fraction of potential sellers to hold on to their loans rather than sell them in the secondary market. We find that a variety of policies that have been proposed during the recent crisis to remedy market inefficiencies do not help resolve the adverse selection problem"--National Bureau of Economic Research web site. |
| General note | Title from PDF file as viewed on 6/24/2010. |
| Bibliography note | Includes bibliographical references. |
| Access restriction | Available only to authorized users. |
| Other forms | Also available in print. |
| Technical details | Mode of access: World Wide Web |
| Genre/form | Electronic books. |
| LCCN | 2010655873 |
Availability
| Library | Location | Call Number | Status | Item Actions |
|---|---|---|---|---|
| Electronic Resources | Access Content Online | ✔ Available |