Bank monitoring incentives and optimal ABS

Pagès, Henri

doi:10.1016/j.jfi.2012.06.001

Cited by 23 publications

(28 citation statements)

References 50 publications

(31 reference statements)

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“…If the detailed planning By combining incentive methods with project governance, the above results are obtained. Incentive methods have not been extensively studied in engineering project governance in the past, but widely adopted in other fields such as outsourcing projects [44], business administration [49], and bank monitoring [48,50], etc. By virtue of the results, the method can obviously help solve the managerial problems encountered in engineering projects.…”

Section: Governing Tactics and Suggestionsmentioning

confidence: 99%

Governing the Moral Hazard in China’s Sponge City Projects: A Managerial Analysis of the Construction in the Non-Public Land

Wang

Ding

2018

Sustainability

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As a new development mode for solving urban water control problems, a sponge city has been widely concerned and steadily promoted in China. The source engineering in the non-public land is called a low-impact development system. Although it is an important part of a sponge city, the effect of its construction and operation is not ideal at present. The main reason for this lies in the moral hazard behavior of the developer who is the responsible party and the agent. In this research, governance mechanisms for preventing the moral hazard behavior are put forward. Additionally, corresponding models are constructed and designed based on incentive theory and project governance theory. Furthermore, the existence constraint conditions of different governance mechanisms are obtained, as well as the optimal reward and punishment of the government. Meanwhile, this paper calculated the expected returns of the government and the developer. The result shows that project completion probability and supervision cost are two key factors affecting the choice of the governance mechanisms. According to different value of project completion probability and supervision cost, this paper evaluated the selection conditions of different governance mechanisms. Moreover, this research puts forward some governing tactics and suggestions for preventing the developer’s moral hazard behavior, in order to improve the effect of project construction, and promote sponge cities to develop in a more efficient and sustainable manner.

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Section: Governing Tactics and Suggestionsmentioning

confidence: 99%

Governing the Moral Hazard in China’s Sponge City Projects: A Managerial Analysis of the Construction in the Non-Public Land

Wang

Ding

2018

Sustainability

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“…The proof is rather tedious and relegated to the Appendix. (See [17] for interpretations.) The technical condition (3.26) restricts the range of admissible values for {λ j } 1≤j≤I .…”

Section: )mentioning

confidence: 99%

“…The paper is a companion to Pagès [17], who contributes to the optimal design of securitization in the presence of banks' impaired incentives to monitor. It provides a coherent mathematical framework for this problem and lays down the rigorous foundations for the formal derivations sketched in [17].…”

Section: Introductionmentioning

confidence: 99%

A Mathematical Treatment of Bank Monitoring Incentives

Pagès

Possamaï

2012

SSRN Journal

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In this paper, we take up the analysis of a principal/agent model with moral hazard introduced in [17], with optimal contracting between competitive investors and an impatient bank monitoring a pool of long-term loans subject to Markovian contagion. We provide here a comprehensive mathematical formulation of the model and show using martingale arguments in the spirit of Sannikov [18] how the maximization problem with implicit constraints faced by investors can be reduced to a classical stochastic control problem. The approach has the advantage of avoiding the more general techniques based on forward-backward stochastic differential equations described in [6] and leads to a simple recursive system of Hamilton-Jacobi-Bellman equations. We provide a solution to our problem by a verification argument and give an explicit description of both the value function and the optimal contract. Finally, we study the limit case where the bank is no longer impatient.

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“…He shows that reputation mitigates the power of retention as a signaling device. For the optimality of more complex retention strategies in a dynamic moral hazard model, see Pagès (2013). 8 These are examples of 'horizontal' slicing of payoffs in contrast to the earlier literature that focused on retention of a 'vertical' slice (see, for example, Gorton and Pennacchi, 1995).…”

Section: Introductionmentioning

confidence: 99%

Portfolio sales and signaling

Bougheas

Worrall

2019

Journal of Banking & Finance

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A common practice of banks has been to pool assets of different qualities and then sell a fraction of the newly created portfolios to investors. We extend the signaling model for single sales of risky assets to portfolio sales. We identify conditions under which signaling at the portfolio level dominates signaling at the single asset level. In particular, when banks have better information about loan types on their books, and some commitment power to sales, can profit by pooling assets whilst retaining a skin in the game.

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Bank monitoring incentives and optimal ABS

Cited by 23 publications

References 50 publications

Governing the Moral Hazard in China’s Sponge City Projects: A Managerial Analysis of the Construction in the Non-Public Land

Governing the Moral Hazard in China’s Sponge City Projects: A Managerial Analysis of the Construction in the Non-Public Land

A Mathematical Treatment of Bank Monitoring Incentives

Portfolio sales and signaling

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