ABSTRACT
This paper investigates how the risk and the collateral values are jointly affecting the credit rationing. We propose a credit rationing model of continuous default risk and collateral values and show that the medium risk borrowers with low valued (or high transaction cost) collateral are most vulnerable to the credit rationing.
Disclosure statement
No potential conflict of interest was reported by the authors.
Correction Statement
This article has been republished with minor changes. These changes do not impact the academic content of the article.
Notes
1 For the notational convenience, we omit the conditional parameters and .