Risk and Liquidity in a System Context - November 2005
نویسنده
چکیده
This paper explores the pricing of debt in a nancial system where the assets that borrowers hold to meet their obligations include claims against other borrowers. Assessing nancial claims in a system context captures features that are missing in a partial equilibrium setting. It is possible for spreads to fall as debts rise, as debt-fuelled increases in asset prices and stronger balance sheets reinforce each other. Conversely, it is possible that de-leveraging leads to increases in spreads, as is often observed during crises. Preliminary version.
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