中文版 | English
Title

INVESTMENT, CONSUMPTION SMOOTHING WITH CREDIT GUARANTEE AND ADVERSE SELECTION

Author
Corresponding AuthorYang, 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 TypeJournal Article
Identifierhttp://kc.sustech.edu.cn/handle/2SGJ60CL/501474
DepartmentDepartment 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 AffilicationDepartment of Finance
Corresponding Author AffilicationDepartment of Finance
First Author's First AffilicationDepartment 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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