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Loan sales under asymmetric information

Author

Listed:
  • Mónica Vargas

Abstract

Loans are illiquid assets that can be sold in a secondary market even that buyershave no certainty about their quality. I study a model in which a lender has accessto new investment opportunities when all her assets are illiquid. To raise funds, thelender may either borrow using her assets as collateral, or she can sell them in a secondarymarket. Given asymmetric information about assets quality, the lender cannotrecover the total value of her assets. There is then a role for the government to correctthe information problem using fiscal tools.

Suggested Citation

  • Mónica Vargas, 2010. "Loan sales under asymmetric information," Documentos de Trabajo 006827, Universidad del Rosario.
  • Handle: RePEc:col:000092:006827
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    More about this item

    Keywords

    Loan Sales; Asymmetric Information; Liquidity; Securitization;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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