Abstract

http://ssrn.com/abstract=1472693
 
 

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On the Management of Financial Guarantees


Robert C. Merton


MIT Sloan School of Management; National Bureau of Economic Research (NBER); Harvard Business School - Finance Unit

Zvi Bodie


Boston University - Department of Finance & Economics

1992

Financial Management, Financial Management Association, Vol. 21, No. 4, Winter 1992

Abstract:     
Guarantees of financial contracts, such as loans, deposit insurance, and swaps, pervade the financial system and play an important role in corporate and public finance. This paper develops a framework for analyzing the efficient management of such guarantees in both the private and public sectors. Within the private sector, it explores applications of guarantee management in non-financial corporations as well as financial institutions. Just as there are special advantages to having government rather than private entities provide guarantees, so there are special problems. The paper identifies these advantages and problems and explores some of the tradeoffs between government and private-sector solutions to the guarantee problem. A central point is that the principles for effective management of guarantees are the same, whether in the corporate, financial, or public sectors.

Number of Pages in PDF File: 44

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Date posted: September 14, 2009  

Suggested Citation

Merton, Robert C. and Bodie, Zvi, On the Management of Financial Guarantees (1992). Financial Management, Financial Management Association, Vol. 21, No. 4, Winter 1992. Available at SSRN: http://ssrn.com/abstract=1472693

Contact Information

Robert C. Merton
MIT Sloan School of Management ( email )
77 Massachusetts Avenue
E62-634
Cambridge, MA 02139-4307
United States
617 715 4866 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
617-495-6678 (Phone)
Zvi Bodie (Contact Author)
Boston University - Department of Finance & Economics ( email )
595 Commonwealth Avenue
Boston, MA 02215
United States
617-353-4160 (Phone)
617-353 6667 (Fax)
HOME PAGE: http://smgnet.bu.edu/mgmt/profiles/BodieZvi.html
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