Adverse selection in a model of real estate lending
Article Abstract:
We provide a rationale for the presence of points in mortgage loan contracts. Our analysis builds on two key features. First, insurance markets are unavailable for labor income. Second, the "due-on-sale" clause allows banks to offer loan contracts which partially insure against fluctuations in labor income. If explicit prepayment penalties are prohibited by law, points serve effectively as prepayment penalities. We also examine environments where such penalties are not prohibited and show that points will be used if interest rates cannot depend on the size of the loan. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1989
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The stocks market's reaction to unemployment news: why bad news is usually good for stocks
Article Abstract:
A study is conducted to find out the effect of unemployment news on the performance of stock market.
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 2005
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