An Option-Based Model of Equilibrium Credit Rationing
AbstractThis paper applies options theory to the model of equilibrium credit rationing developed by Stiglitz and Weiss (1981) by noticing that, given a standard debt contract and limited liability, the payoffs to the lender and the borrower when a loan is make involve a put option and a call option respectively. Information asymmetry is modelled using stochastic volatility option pricing methods.
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Bibliographic InfoPaper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 128.
Length: 14 pages
Date of creation: 1996
Date of revision:
Contact details of provider:
Web page: http://www.nuff.ox.ac.uk/economics/
CREDIT ; ECONOMIC EQUILIBRIUM ; DEBT ; INFORMATION;
Other versions of this item:
- Mason, Robin, 1998. "An options-based model of equilibrium credit rationing," Journal of Corporate Finance, Elsevier, vol. 4(1), pages 71-85, March.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Sovereign debt crises and credit to the private sector,"
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Elsevier, vol. 74(1), pages 53-69, January.
- Carlos Arteta & Galina Hale, 2006. "Sovereign debt crises and credit to the private sector," Working Paper Series 2006-21, Federal Reserve Bank of San Francisco.
- Carlos Arteta & Galina Hale, 2006. "Sovereign debt crises and credit to the private sector," International Finance Discussion Papers 878, Board of Governors of the Federal Reserve System (U.S.).
- Hale, Galina & Arteta, Carlos, 2009.
"Currency crises and foreign credit in emerging markets: Credit crunch or demand effect?,"
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- Galina Hale & Carlos Arteta, 2007. "Currency crises and foreign credit in emerging markets: credit crunch or demand effect?," Working Paper Series 2007-02, Federal Reserve Bank of San Francisco.
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