Fire-sale risk in the leveraged loan market

• 成果类型: Article
• 署名作者: Elkamhi, Redouane; Nozawa, Yoshio
• 署名单位: University of Toronto
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2022.05.003
• 发表日期: 2022
• 页码: 1120-1147
• 关键词: Collateralized loan obligation; fire sales; Leveraged loan; shadow banking; Stress test; Systemic risk

摘要

Using detailed loan holding data of Collateralized Loan Obligations (CLOs), we document empirical evidence for the fire sale of leveraged loans due to leverage constraints on CLOs. Constrained CLOs are forced to sell loans downgraded to CCC or below, and thus loans widely held by constrained CLOs experience temporary price depreciation. This instability is exacerbated by diversification requirements. As the CLO market grows, each CLO's effort to diversify its portfolio leads to similarity in loan holdings among CLOs, and thus their leverage constraints simultaneously bind. CLOs' overlapping loan holdings spread idiosyn-cratic shocks to large borrowers to the overall leveraged loan market.(c) 2022 Elsevier B.V. All rights reserved.