This paper models and provides empirical evidence for the quality of assets that are securitized through bankruptcy remote special purpose vehicles (SPVs). The model predicts that assets sold to SPVs will be of lower quality (“lemons”) compared to assets that are not sold to SPVs. We find...

One of the primary results of studying asymmetric information as part of information economics over the last 30 years has been a theory of markets for lemons - that is, markets for goods that are likely to be of poor quality. Unfortunately, it has proven difficult to directly test the lemons...