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Usury and Collateral Pricing: Towards an Alternative Explanation

Author

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  • Gangopadhyay, Shubhashis
  • Sengupta, Kunal

Abstract

This paper studies the problem of collateral variation by the lender. The previous literature sug gested that collaterals will be underpriced to cover the risks from d efault. The authors show that this result is erroneous and was caused by a miscalculation of the default amount. Properly calculated, ther e is actually an "overpricing" of collateral by the lender. Underpr icing can come about only in the presence of interest-rate ceilings a nd interlinked markets. Copyright 1987 by Oxford University Press.

Suggested Citation

  • Gangopadhyay, Shubhashis & Sengupta, Kunal, 1987. "Usury and Collateral Pricing: Towards an Alternative Explanation," Cambridge Journal of Economics, Oxford University Press, vol. 11(1), pages 47-54, March.
  • Handle: RePEc:oup:cambje:v:11:y:1987:i:1:p:47-54
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    References listed on IDEAS

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    Cited by:

    1. Anita Gill, 2006. "Interlinked Agrarian Credit Markets in a Developing Economy: A Case Study of Indian Punjab," Working Papers id:760, eSocialSciences.

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