Title | INVESTMENT, CONSUMPTION SMOOTHING WITH CREDIT GUARANTEE AND ADVERSE SELECTION |
Author | |
Corresponding Author | Yang, Zhaojun |
Publication Years | 2022-12-01
|
DOI | |
Source Title | |
ISSN | 1547-5816
|
EISSN | 1553-166X
|
Abstract | This paper develops a single-period model of investments with credit guarantee swaps including Fee-for-Guarantee Swaps (FGSs), Equity-for-Guarantee Swaps (EGSs) and Option-for-Guarantee Swaps (OGSs). Enter-prises have two types and high-quality enterprises suffer from adverse selection. The entrepreneurs are risk-averse while insurers are risk-neutral, taking on all default losses. We show that in pooling equilibria, high-quality enterprises are forced to transfer partial profits to low-quality ones. Even in separating equilibria, it is possible that high-quality enterprises suffer losses from adverse selection. As far as high-quality enterprises are concerned, OGS financing modes are the best, and they are more likely to reach separating equilibria than others. Only if the guarantee cost is feasible, the higher the strike price of the option, the higher the project value, and the optimal strike price makes guarantee cost arrive at its maximum feasible value. |
Keywords | |
URL | [Source Record] |
Indexed By | |
Language | English
|
SUSTech Authorship | First
; Corresponding
|
Funding Project | National Natural Science Foundation of China[72031003]
; Philosophy, Social Science Plan Project of Guangdong Province in China[GD19CYJ23]
|
WOS Research Area | Engineering
; Operations Research & Management Science
; Mathematics
|
WOS Subject | Engineering, Multidisciplinary
; Operations Research & Management Science
; Mathematics, Interdisciplinary Applications
|
WOS Accession No | WOS:000938059100001
|
Publisher | |
Data Source | Web of Science
|
Citation statistics |
Cited Times [WOS]:0
|
Document Type | Journal Article |
Identifier | http://kc.sustech.edu.cn/handle/2SGJ60CL/501474 |
Department | Department of Finance |
Affiliation | 1.Southern Univ Sci & Technol, Dept Finance, Shenzhen, Peoples R China 2.Natl Ctr Appl Math Shenzhen, Shenzhen, Peoples R China |
First Author Affilication | Department of Finance |
Corresponding Author Affilication | Department of Finance |
First Author's First Affilication | Department of Finance |
Recommended Citation GB/T 7714 |
Liu, Xiang,Yang, Zhaojun. INVESTMENT, CONSUMPTION SMOOTHING WITH CREDIT GUARANTEE AND ADVERSE SELECTION[J]. Journal of Industrial and Management Optimization,2022.
|
APA |
Liu, Xiang,&Yang, Zhaojun.(2022).INVESTMENT, CONSUMPTION SMOOTHING WITH CREDIT GUARANTEE AND ADVERSE SELECTION.Journal of Industrial and Management Optimization.
|
MLA |
Liu, Xiang,et al."INVESTMENT, CONSUMPTION SMOOTHING WITH CREDIT GUARANTEE AND ADVERSE SELECTION".Journal of Industrial and Management Optimization (2022).
|
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