Competitive Consumer Loan Market Model: Interest-Collateral Equilibrium

6 Pages Posted: 27 Jun 2016

See all articles by Savva Shanaev

Savva Shanaev

Northumbria University

Arina Shuraeva

University of London; University of Northumbria at Newcastle

Date Written: June 27, 2016

Abstract

In this article we develop a fairly simple mathematical model of a competitive consumer loan market. Given the market deposit rate and the structure of the public’s time preference it predicts the equilibrium interest rate on consumer loans and the equilibrium degree of collateral coverage (the assets pledged – loans given ratio). Any borrower, according to his or her time preference, rate offered and collateral pledged decides whether he or she repays the loan or not and the banks try to deal with the arising information asymmetry. At the end of the paper we suggest the possible ways to further generalise the model.

Keywords: microeconomics, mathematical economics, banking, collateral

JEL Classification: C69, D21, G21

Suggested Citation

Shanaev, Savva and Shuraeva, Arina and Shuraeva, Arina, Competitive Consumer Loan Market Model: Interest-Collateral Equilibrium (June 27, 2016). Available at SSRN: https://ssrn.com/abstract=2801107 or http://dx.doi.org/10.2139/ssrn.2801107

Savva Shanaev (Contact Author)

Northumbria University ( email )

Pandon Building
208, City Campus East-1
Newcastle-Upon-Tyne, Newcastle NE1 8ST
United Kingdom

Arina Shuraeva

University of London ( email )

Senate House
Malet Street
London, WC1E 7HU
United Kingdom

University of Northumbria at Newcastle ( email )

Pandon Building
208, City Campus East-1
Newcastle-Upon-Tyne, Newcastle NE1 8ST
United Kingdom

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