Loan sales under asymmetric information

Mónica Vargas (monica.vargas61@urosario.edu.co)

No 6827, Documentos de Trabajo from Universidad del Rosario

Abstract: Loans are illiquid assets that can be sold in a secondary market even that buyershave no certainty about their quality. I study a model in which a lender has accessto new investment opportunities when all her assets are illiquid. To raise funds, thelender may either borrow using her assets as collateral, or she can sell them in a secondarymarket. Given asymmetric information about assets quality, the lender cannotrecover the total value of her assets. There is then a role for the government to correctthe information problem using fiscal tools.

Keywords: Loan Sales; Asymmetric Information; Liquidity; Securitization (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Pages: 28
Date: 2010-01-31
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:006827

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