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Abstract Adopting the theories and the models in the research field of game theory and information economics,the paper discussed the information structure between the borrower and the lender on the residential mortgage market.Taking the mortgage rate,collateral value and the borrower's default probability into account,the paper set up the objective functions of the borrower and the lender respectively,and analyzed the qualifications for the mortgage loan agreements and the lending strategies of the lender.It was found that because of the asymmetric information structure,the limitations on the lender's lending strategies,such as the interest rate controls would worsen the efficiency of the credit allocation on the mortgage market,and lead to the risks of the adverse selection and the moral hazard.Based on the conclusions,the paper provided some suggestions from the angle of costs,to improve the information structure and reduce the mortgage credit risks at present stage of Chinese residential mortgage market.
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Received: 25 March 2006
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