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Title Two-Dimensional Self-Selection of Borrowers
   
Author Sung Hyun Kim (Ewha Womans University)
   
Volume 35 Number 1
       
Pages 125-161 
       
Keywords Self-Selection, Mortgage Choice, ARM, Gamma Distribution
       
Abstract The multi-dimensional heterogeneity of agents can provide interesting insights. To
illustrate this point in the loan market context, we examine the borrowers decision to switch
from a variable rate loan to a fixed rate loan, using a model of two-dimensional borrower
types (risk aversion and riskiness). Among high risk borrowers, more risk averse ones are
selected out of the loan market and less risk averse ones are not tempted by the fixed rate
loan. Switchers are more risk averse but have lower default risk. The Financial Services
Commissions
   
File KER-20190101-35-1-05.pdf
   
 
 
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