Brown Bag Seminar - Florian Pauer
Wir freuen uns, für 9. Dezember 2020, ein Brown Bag Seminar mit Florian Pauer (WU Wien) ankündigen zu können.
Angesichts der gegenwärtigen Situation verlegen wir die Brown Bag-Seminare in Microsoft-Teams.
Die Veranstaltung findet am Mittwoch, 9. Dezember 2020 online über MS Teams von 13:00-14:00 Uhr statt.
Die Veranstaltung wird um 12:45 Uhr eröffnet, damit Sie sich einwählen können. Um dem Stream beizutreten, folgen Sie bitte diesem Link.
Florian Pauer wird sein Paper "Sell or Hold? On the Value of Non-Performing Loans and Mandatory Write-Off Rules" vorstellen.
Abstract: This paper investigates the decision that rational banks face when they consider selling a non-performing loan (NPL). We start with developing a risk neutral pricing model for non-performing loans and show that even if a bank and a potential buyer agree on the expected recovery value a difference in the precision in the estimation of the drift of the underlying recovery process may greatly influence the decision to sell an NPL. This difference could be due to private information of the bank about the borrower’s loan history or due to a larger sample of similar borrowers where defaults can be observed. Furthermore, the question if it is optimal to hold on to an NPL is also affected by capital requirements and funding costs banks typically face. This is of particular interest in the light of mandatory write-off policies, which basically force banks to write-off/provision for NPLs after some time has passed. This raises the question whether or not banks are incentivized to sell NPLs at prices that are too low and thus represent a wealth transfer from banks to other capital market participants. Given the results presented here it can be concluded that mandatory write-off rules would indeed lead to the aforementioned transfer and that such policies could be refined to incorporate a bank’s ability to estimate time-series properties of an NPL’s underlying recovery rate process.