We consider an economy in which a lender finances loans to borrowers by issuing a securitized product to investors and in which the credit quality of the product can depend on whether the lender screens borrowers. In the presence of asymmetric information between the lender and investors...

We consider an economy in which a lender finances his loans to borrowers by issuing a securitized product to investors, and where the credit quality of the product may depend on whether the lender screens the borrowers. In the presence of asymmetric information between the lender and the...