Economics, Econometrics and Finance
4 years ago

International banks adjust loan terms to determine mispricing of sovereign risk loans.

Journal of International Financial Markets Institutions and Money
A model for determining mispricing of sovereign risk loans
Thomas B. Sanders, W. Brian Barrett, Michael R. Palmer

Paper Summary

Banks adjust loan rates and terms for sovereign debt based on borrower needs while ensuring a fair return for the risk. A model using two stage least squares can determine if loans are mispriced.

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