Contact Information 2001 Sheridan Rd, Rm 408 Evanston, IL 60208 USA +1-847-924-9146 (cell) +1-847-467-4553 (office) Email Flavio de Andrade

Curriculum Vitae (Long Version)
(PDF 26 KB/4 pages)

Resume (Short Version)
(PDF 32 KB)

Research Interests: Asset Pricing, Government Guarantees, Derivatives, Fixed Income Securities, and Impact of Earnings Information on Equity Prices

Research:
Why Do Guaranteed SBA Loans Cost Borrowers So Much?
(with Deborah Lucas)

Abstract: The SBA assists small businesses in obtaining access to bank credit by guaranteeing a portion of their loans. Despite the substantial federal guarantee and a history of modest default rates, borrowers are charged rates similar to those on low-grade bonds. We suggest several possible explanations for this phenomenon, including lack of competition between SBA lenders, and a relatively high cost of insured capital for guaranteed loans. Using comprehensive data obtained from SBA on all disbursed loans from 1988 to 2008, we find some evidence of market power in that large lenders charge borrowers relatively high rates. To evaluate the cost of capital on the guaranteed portion of SBA loans, we develop a Monte Carlo model of the cash flows on fully guaranteed SBA securitized pools, taking into account historical default and prepayment patterns. Comparing our model predictions to market prices provided by large dealer in SBA pools, we find that investors required a spread between 100 and 200 bps over the Treasury curve to hold these securities.