Multiple contracts: periodic balloon payments and constant amortization

Clovis de Faro and Gerson Lachtermacher

No 847, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: As far as it is known, at least in Brazil, the idea of substituting a single contract by multiple individual contracts, was first presented in Sandrini (2007), later followed in Vieira Sobrinho (2012); both addressing the concept of anatocism (the charge of interest upon interest). Nevertheless, the pioneering work of De-Losso et al. (2013) should be credited as the first to show that, considering its cost of capital, a financial institution may be better off if a single contract is substituted by multiple contracts. With their analysis focusing attention only in the case of constant installments.

Date: 2025-06-27
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