The Pricing of Small Business Loans
A major difficulty in determining the appropriate risk premium for lending to small businesses is the lack of market value information. This paper develops a mean-variance model that uses available failure rate data to establish a benchmark risk premium for lending to firms in specific industries. This model incorporates the benefits of diversifying across firms and industries. This paper also presents evidence that a random walk model provides the best forecast of future failure rates.
Volume (Year): 3 (1994)
Issue (Month): 3 (Fall)
|Contact details of provider:|| Postal: |
Web page: http://bschool.pepperdine.edu/jef
More information through EDIRC
References listed on IDEAS
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.:
- Pyle, David H, 1971. "On the Theory of Financial Intermediation," Journal of Finance, American Finance Association, vol. 26(3), pages 737-47, June.
- Koehn, Michael & Santomero, Anthony M, 1980. " Regulation of Bank Capital and Portfolio Risk," Journal of Finance, American Finance Association, vol. 35(5), pages 1235-44, December.
When requesting a correction, please mention this item's handle: RePEc:pep:journl:v:3:y:1994:i:3:p:249-260. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Craig Everett)
If references are entirely missing, you can add them using this form.