Profits with Real Estate Loans & Online Auctions » credit cards

Strategic behavious behing a payday loan

admin — Sat, 13 Feb 2010 19:06:33 +0000

There are three principal determinants of the bid–ask spread: fixed costs, adverse selection costs and inventory costs. Fixed costs are order processing costs, such as administrative costs and compensation for the market-maker’s time. Adverse selection costs stem from asymmetric information. Finally, dealers must sustain the inventory costs of holding undesired portfolios of risky assets. By nature, only risk-averse dealers will be concerned with inventory costs, so the models that include them assume that liquidity providers are risk-averse. This assumption, which complicates the algebra, can be dispensed with in models with adverse selection.

The next two articles are dedicated to models that focus on the adverse selection component of the bid–ask spread. It will also discuss inventory and fixed costs. The model presented in this chapter draws on the work of Kyle (1985), who posits a group of risk-neutral market-makers facing insiders and liquidity traders. In fact, Kyle models the strategic interaction between an insider who chooses to trade in order to maximize his profits and a group of market-makers who take the insider’s strategy into account in updating their beliefs on the future value of the asset and setting the equilibrium price. In this way, Kyle shows how information is incorporated into prices and how the latter reflect both the trading protocol where market-makers set prices and the strategic behaviour of the informed trader.

Where to look for credit help in the first place

admin — Tue, 05 Jan 2010 11:46:58 +0000

Scattered across the country are more than 900 Small Business Development Centers. These offices are usually affiliated with community colleges. The sole purpose of the SBDC is to assist small business owners. They offer many free services and classes on a variety of subjects that will maximize the chances that your small business will succeed in the marketplace. Free counseling with business consultants who will help you to set goals and even to develop your personalized business plan is available for the asking. Some Small Business Development Centers even offer business incubation for a nominal cost. Business incubation will allow you to share an office, office equipment and even secretarial assistance with other start-up companies in office space provided by the SBDC. If you are building a business around your invention, taking advantage of the business incubation services offered by the SBDC will allow you to save substantial amounts of initial cash outlay when your income is likely to be at its lowest.

Small Business Development Centers can also provide information and guidance on how to apply for and obtain Small Business Administration loans through your local bank or credit union.

Default loans rates tend to be higher in recessionary periods

admin — Thu, 22 Oct 2009 17:56:03 +0000

The rating agencies provide the most accurate data on historical default rates. Based on their data, empirical studies by Wilson Saunders and others suggest that default rates tend to be higher in recessionary periods. As might be expected, default rates usually peak at the end of recessions and fall when the economy is expanding. A closer look at history shows that default rates reached their highest levels in the 1930s, peaking at 9 percent in 1932. Since then they have never come close to that level. From 1940 to 1970 they were extremely low, hardly ever exceeding 1 percent. Moody’s themselves note that in the 1973 recession, the default rate was close to zero because only the best issuers had been able to access the capital markets in the previous years. In the early 1990s and at the beginning of the new millennium default rates rose significantly, reaching their peak at about 4 percent. Thus, the default cycle has mirrored the business cycle very well in the past 15 years. Yet one difference is not reflected in this figure. On a dollar-weighted basis, the 2002 default rate for speculative grade issuers was nearly twice as high as in 1991, causing painful losses for many investors.

Furthermore the 2002 default rate for US investment grade issuers reached more than 1 percent on an issuer-weighted basis and almost 3 percent on a dollar-weighted basis. This is substantially above the 30-year average of the investment grade default rate, which is about 25 basis points. Clearly, investment grade defaults are supposed to happen very infrequently.