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This document summarizes an academic article that develops a theory of financial intermediation based on minimizing the cost of monitoring useful information to resolve incentive problems between borrowers and lenders. It presents a model where a financial intermediary is delegated the task of monitoring loan contracts at a lower gross cost than if each individual lender monitored separately. However, this delegation creates new incentive problems for the intermediary that increase costs. Diversification wi

Author

Mario1199

Language

EN