Equity Participation without Equity: An Analysis of Hope Notes ()
ABSTRACT
The paper examines the case of splitting
a defaulted mortgage loan on a commercial property into an A note that earns interest and a B note that earns a return only if the value of the property
increases. The B note is known as a
“hope note.” The paper shows that the current methods for structuring such a
deal often produce a B note that is
worthless. A state-preference model is employed.
Share and Cite:
J. McDonald, "Equity Participation without Equity: An Analysis of Hope Notes,"
Modern Economy, Vol. 4 No. 5, 2013, pp. 370-374. doi:
10.4236/me.2013.45038.
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