Note that if your personal exposure (q) realizes the bonus throughout the package will get 0. Up coming only the impacted debtors will pay-off early, should your ex article rate of interest stays highest. However in possible regarding a bringing down interest every debtors often pay-off early. The individuals having who the main benefit regarding offer stays b will pay back early and take right up yet another borrowing from the bank from the a lower rate of interest. Others, to possess just who the personal exposure features know might pay off very early. For them the new get regarding package could be 0.

They reinvests brand new paid back mortgage at the same rate of interest once the the fresh credit rate

In the model a risk premium exists only for the first credit and not for the second credit. If the debtor takes up the second credit at the low interest rate ( \(_<2l>)\) the interest rate cannot-by assumption-decline any more in future. The bank cannot impose a risk premium on the second credit, because the bank has no damage if the second credit is also prematurely repaid. In the real world it would however recover its handling costs, which are in the model assumed to be 0. This assumption avoids an infinite regress for the calculation of the risk premium without affecting the main point of the analysis. Otherwise, the calculation for the risk premium of the second contract would require the possibility of a third contract and so forth. Читать далее →