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Loan Transactions with Random Dates for the First and Last Periodic Instalments

Author

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  • María del Carmen Valls Martínez
  • Salvador Cruz Rambaud

Abstract

Usually, loan transactions contracted in practice are nonrandom; that is to say, all amounts received (principal) and paid (period instalments) by the borrower are previously agreed with the lender, as well as their respective dates. In this paper, two new alternative loan models are introduced, depending on whether the borrower survives or not to fulfil all repayment obligations. In this way, either the initial or the final date of repayments can be subject to this contingency. Additionally, the different parameters of such random transactions are determined, as well as several measures of profitability/cost for the lender/borrower, respectively. These transactions can be attractive for both the lender and the borrower, which therefore make them worthy of consideration and subsequent implementation for the benefit of both parties.

Suggested Citation

  • María del Carmen Valls Martínez & Salvador Cruz Rambaud, 2016. "Loan Transactions with Random Dates for the First and Last Periodic Instalments," International Journal of Mathematics and Mathematical Sciences, Hindawi, vol. 2016, pages 1-14, August.
    • Handle: RePEc:hin:jijmms:2152189
    DOI: 10.1155/2016/2152189
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    References listed on IDEAS

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    1. Lisa J. Dettling & Joanne W. Hsu, 2014. "The State of Young Adults’ Balance Sheets: Evidence from the Survey of Consumer Finances," Review, Federal Reserve Bank of St. Louis, vol. 96(4), pages 305-330.
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