Bank Loan Maturity and Priority When Borrowers Can Refinance

higher default rate of type B's. As of date 0, the probability of repayment of a loan maturing on date 2 made to a borrower with credit rating f is: q(f) = π + f(1-π). On date 1, all lenders will observe new information about the type of each borrower. The new information, with realization f 1 =. ................
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