Partnerships as insurance devices: theory and evidence

Article Abstract:

The prediction that the attraction of partnerships lies in their ability to provide insurance and that larger partnerships will share profits more fully among partners is affirmed. Using a sample of partners in law firms, partnerships are modeled as mutual insurance associations where individuals unite to insure themselves against idiosyncratic shocks to their human capital, thus producing a tradeoff between efficiency and risk sharing. Partners provide less-than-optimal effort since they keep only a fraction of the profits.

Risk (Economics), Partnership, Partnerships

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Bank financing and investment decisions with asymmetric information about loan quality

Article Abstract:

The effect of asymmetric information on banks' choice of their investment and asset portfolio and decisions to incur liabilities is discussed. A model is developed that explains the seeming paradox of risk-allergic banks willing to take risks in other areas. The degree of information available to banks affect their attitude towards risk. Evidence is presented on the hypothesis that banks with better-quality loans are willing to handle more cash and securities.

Banking industry, Finance, Bank loans

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An options - based approach to evaluating the risk of Fannie Mae and Freddie Mac

Article Abstract:

Options pricing approach taken towards the rating of the costs and risks of Fannie Mae and Freddie Mac, is presented. Importance of the approach in measuring federal credit guarantee value is discussed.

Forecasts, trends, outlooks, Commodity & service prices, Financial Corporations, Mortgage Bankers, Real Estate Credit, Mortgage Bankers and Brokers, Mortgage Bankers & Brokers, Mortgage and Nonmortgage Loan Brokers, Models, United States, Usage, Prices and rates, Forecasts and trends, Options (Finance), Market trend/market analysis, FNM, Financial institutions, Mortgage banks, Company pricing policy, Federal Home Loan Mortgage Corp., FRE, Federal National Mortgage Association

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