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;
Find related papers by JEL classification:
- D5 - Microeconomics - - General Equilibrium and Disequilibrium
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- 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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Guillaume Plantin & Haresh Sapra & Hyun Song Shin, 2008.
"Marking-to-Market: Panacea or Pandora's Box?,"
Journal of Accounting Research,
Wiley Blackwell, vol. 46(2), pages 435-460, 05.
- Ilhyock Shim & Goetz von Peter, 2007. "Distress selling and asset market feedback," BIS Working Papers 229, Bank for International Settlements.
- Borio, Claudio & Zhu, Haibin, 2012.
"Capital regulation, risk-taking and monetary policy: A missing link in the transmission mechanism?,"
Journal of Financial Stability,
Elsevier, vol. 8(4), pages 236-251.
- Claudio Borio & Haibin Zhu, 2008. "Capital regulation, risk-taking and monetary policy: a missing link in the transmission mechanism?," BIS Working Papers 268, Bank for International Settlements.
- Athanasoglou, Panayiotis & Ioannis, Daniilidis & Manthos, Delis, 2013. "Bank procyclicality and output: Issues and policies," MPRA Paper 50830, University Library of Munich, Germany.
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