Credit Market Speculation and the Cost of Capital

• 成果类型: Article
• 署名作者: Che, Yeon-Koo; Sethi, Rajiv
• 署名单位: Columbia University; Columbia University; The Santa Fe Institute
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• DOI: 10.1257/mic.6.4.1
• 发表日期: 2014
• 页码: 1-34
• 关键词: default swaps; stock-market; expectations; BEHAVIOR; bubbles; opinion; CRISIS; prices; TRADE; debt

摘要

We examine the effects of speculation using credit derivatives on the cost of debt and the likelihood of default. The availability of credit default swaps induces investors who are optimistic about borrower revenues to sell protection instead of buying bonds. This benefits borrowers if protection can only be bought with an insurable interest, but can increase the cost of debt and crowd out productive lending if protection can be purchased as a bet on default. We also show that the possibility of speculation on default may cause multiple equilibria and exacerbate the problem of rollover risk.