The optimal design of a loan contract is one of the topics most intensively analyzed in institutional economics. Particularly, the importance of collateral in mitigating problems of asymmetric information due to credit risk is pointed out in a large theoretical and empirical literature. Ever since the mid 70s, informational asymmetries have been highly emphasized in economic theory. On the one hand, moral hazard provides risk incentive arising when a borrower protected by limited liability has the choice between different levels of risk (cf. Jensen and Meckling 1976).
Anaemia is defined as reduction in circulating haemoglobin mass below the critical level. The normal haemoglobin (Hb) concentration in the body is between 12-14 grams percent. WHO has accepted up to 11gm percent as the normal haemoglobin level in pregnancy. Therefore any haemoglobin level below 11gm in pregnancy should be considered as anaemia. However in India and most of the other developing countries the lower limit is often accepted as 10 gms percent.
In view of the occurrence of subprime mortgage crisis in the United States, Mortgage Insurance Companies Association (MICA) have reported that large mortgage insurers of its members have recorded $2.6 billion in losses in 2008. The report sparks concerns that rising foreclosure rates of the borrowers could force the mortgage industry into a money crunch. For example, Shares of Radian Guaranty, Triad, and PMI Mortgage Insurance Group have lost 90 percent of their share value in 2007; Triad Guaranty Insurance Corporation fails to meet capital requirement in March 31, 2008 and may even going to be out of business. As a consequence, the phenomenon that the defaults of the borrower will spill over into the default probabilities of the mortgage insurer needs to be considered, and it is termed ‘counterparty default risk’. However, when the mortgage insurer fails to meet the risk-to-capital ratio and the government is forced to allow continuing their operations in order to avoid the systematic economic crisis, capital forbearance occurs. It is essential to incorporate the counterparty default risk and capital forbearance, generally not considered by the previous studies, into the pricing model of mortgage insurance?particularly in the case of a mortgage crisis.
