The risk sharing argument for the existence of loan commitments suggests that borrowers, who are more risk
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Question:
The risk sharing argument for the existence of loan commitments suggests that borrowers, who are more risk averse than the banks, pay the banks to bear part of the interest rate risk. Explain. If possible, use diagrams to illustrate the explanation?
Expert Answer:
The risksharing argument for the existence of loan commitments suggests that borrowers who are typically more riskaverse than banks pay banks to bear part of the interest rate risk associated with loa... View the full answer
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