Bank monitoring incentives under moral hazard and adverse selection
Nicol\'as Hern\'andez Santib\'a\~nez,
Dylan Possama\"i and
Papers from arXiv.org
In this paper, we extend the optimal securitisation model of Pag\`es  and Possama\"i and Pag\`es  between an investor and a bank to a setting allowing both moral hazard and adverse selection. Following the recent approach to these problems of Cvitani\'c, Wan and Yang , we characterise explicitly and rigorously the so-called credible set of the continuation and temptation values of the bank, and obtain the value function of the investor as well as the optimal contracts through a recursive system of first-order variational inequalities with gradient constraints. We provide a detailed discussion of the properties of the optimal menu of contracts.
New Economics Papers: this item is included in nep-cta and nep-mic
Date: 2017-01, Revised 2019-01
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://arxiv.org/pdf/1701.05864 Latest version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1701.05864
Access Statistics for this paper
More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().