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《Shanghai Journal of Economics》 2009-06
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A Perspective on the Information Asymmetry in the Sub-prime Mortgage Crisis

Shen Yunliang Liu Jianguo(East China University of Science and Technology 200237)  
The essay focuses on analyzing the information asymmetry in the process of Sub-prime debt`s formation.First,the essay introduces the information asymmetry between Sub-prime borrowers and investment banks and analyses how investment banks design predatory loan.Second,the essay proposes that,because of the information asymmetry between Sub-prime debt issuers and Sub-prime debt buyers,there is adverse selection in the Sub-prime debt market,and tells the ways that solve it.Third,the essay differentiates Sub-prime debt and corporation debt on the risk characteristics,and tells how investors were misled by rating agency because of their information disadvantage.Last,the essay analyses the fraud caused by information asymmetry between Sub-prime mortgage brokers and loan companies and the moral hazard problem caused by the information asymmetry between Sub-prime debt issuers and Financial services companies.
【CateGory Index】: F837.12
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