Collateral in Banking Policy and Adverse Selection

Bernard Gilroy and Udo Broll

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents a theoretical model of lending which emphasizes the role of asymmetric information and total debt service obligations between creditors and debtors. The analytical approach is based upon that of Stiglitz and Weiss (1981); however, emphasis here is placed upon collateral policy aspects of credit contracts as compared to the interest rate policy aspects. It is demonstrated that under certain market constellations, even assuming a completely flexible collateral banking policy, the credit market may be characterized by a disequilibrium situation.

Keywords: asymmetric information; banking; collateral policy (search for similar items in EconPapers)
JEL-codes: D82 G1 G21 (search for similar items in EconPapers)
Date: 1986
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Citations: View citations in EconPapers (1)

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Journal Article: Collateral in Banking Policy and Adverse Selection (1986)
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