Probability of default in collateralized credit operations for small business

Jaimilton Carvalho, Jaime Orrillo () and Fernanda Rocha Gomes da Silva

The North American Journal of Economics and Finance, 2020, vol. 52, issue C

Abstract: The paper examines how the collateral affects the probability of default for small firms. We present a stylized theoretical model to derive the relationship between the level of collateral and subsequent loan default. We find that the probability of default is negatively correlated with the level of collateral, which is intuitive. Subsequently, we test this relationship by using a proprietary database of collateralized loans of small Brazilian enterprises.

Keywords: General equilibrium; Incomplete markets; Probability of default; D52; C81 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:52:y:2020:i:c:s1062940819300609

DOI: 10.1016/j.najef.2019.101129

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