Risk and liquidity in a system context
AbstractThis paper explores the pricing of debt in a financial system where the assets that borrowers hold to meet their obligations include claims against other borrowers. Assessing financial 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.
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Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 212.
Length: 51 pages
Date of creation: Aug 2006
Date of revision:
systemic risk; leverage; asset prices; liquidity;
Other versions of this item:
- D5 - Microeconomics - - General Equilibrium and Disequilibrium
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- M4 - Business Administration and Business Economics; Marketing; Accounting - - Accounting
This paper has been announced in the following NEP Reports:
- NEP-ACC-2007-06-18 (Accounting & Auditing)
- NEP-ALL-2007-06-18 (All new papers)
- NEP-CFN-2007-06-18 (Corporate Finance)
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