Adverse Selection and Moral Hazard Effects in the Mortgage Market: An Empirical Analysis

1991 ◽  
Vol 57 (4) ◽  
pp. 1071 ◽  
Author(s):  
Robert E. Martin ◽  
David J. Smyth
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Empirical Analysis ◽  
Mortgage Market

scholarly journals Selection, Leverage, and Default in the Mortgage Market

2021 ◽  
Author(s):  
Arpit Gupta ◽  
Christopher Hansman
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Natural Experiment ◽  
Causal Effect ◽  
Mortgage Market ◽  
Point Estimates ◽  
Ex Ante ◽  
Contract Structure ◽  
Adjustable Rate ◽  
Default Prevention

Abstract We ask whether the correlation between mortgage leverage and default is due to moral hazard (the causal effect of leverage) or adverse selection (ex ante risky borrowers choosing larger loans). We separate these information asymmetries using a natural experiment resulting from the contract structure of option adjustable-rate mortgages and unexpected 2008 divergence of indexes that determine rate adjustments. Our point estimates suggest that moral hazard is responsible for 40% of the correlation in our sample, while adverse selection explains 60%. We calibrate a simple model to show that leverage regulation must weigh default prevention against distortions due to adverse selection.

AGENCY PROBLEM DALAM PENERAPAN PEMBIAYAAN AKAD MUDHARABAH PADA PERBANKAN SYARIAH

ALQALAM ◽  
2016 ◽  
Vol 33 (1) ◽  
pp. 46
Author(s):  
Aswadi Lubis
Keyword(s):  
High Risk ◽  
Asymmetric Information ◽  
Human Resources ◽  
Moral Hazard ◽  
Adverse Selection ◽  
Agency Problem ◽  
Agency Problems ◽  
Islamic Banking ◽  
The Public

The purpose of writing this article is to describe the agency problems that arise in the application of the financing with mudharabah on Islamic banking. In this article the author describes the use of the theory of financing, asymetri information, agency problems inside of financing. The conclusion of this article is that the financing is asymmetric information problems will arise, both adverse selection and moral hazard. The high risk of prospective managers (mudharib) for their moral hazard and lack of readiness of human resources in Islamic banking is among the factors that make the composition of the distribution of funds to the public more in the form of financing. The limitations that can be done to optimize this financing is among other things; owners of capital supervision (monitoring) and the customers themselves place restrictions on its actions (bonding).

scholarly journals Moral Hazard and Claims Deterrence in Private Disability Insurance

2014 ◽  
Vol 6 (4) ◽  
pp. 110-141 ◽  
Author(s):  
David Autor ◽  
Mark Duggan ◽  
Jonathan Gruber
Keyword(s):  
Moral Hazard ◽  
Empirical Analysis ◽  
Time Variation ◽  
Rate Increase ◽  
Disability Insurance ◽  
Severe Disabilities ◽  
Replacement Rate ◽  
Waiting Period ◽  
Over Time

Exploiting within-firm, over-time variation in plan parameters for nearly 10,000 Long Term Disability (LTD) policies held by US employers, we present the first empirical analysis of the determinants of private LTD spells. We find that a shorter waiting period and a higher replacement rate increase the incidence of LTD spells. Sixty percent of the latter effect is due to the mechanical censoring of shorter spells, with the remainder due to the deterrence of spells that would have continued beyond the waiting period. Deterrence is driven primarily by a reduction in the incidence of shorter duration spells and less severe disabilities. (JEL D82, G22, J28, J32)

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