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来源类型Working Paper
规范类型报告
DOI10.3386/w17599
来源IDWorking Paper 17599
Should Derivatives be Privileged in Bankruptcy?
Patrick Bolton; Martin Oehmke
发表日期2011-11-17
出版年2011
语种英语
摘要Derivative contracts, swaps, and repos enjoy "super-senior" status in bankruptcy: they are exempt from the automatic stay on debt and collateral collection that applies to virtually all other claims. We propose a simple corporate finance model to assess the effect of this exemption on firms' cost of borrowing and incentives to engage in swaps and derivatives transactions. Our model shows that while derivatives are value-enhancing risk management tools, super-seniority for derivatives can lead to inefficiencies: collateralization and effective seniority of derivatives shifts credit risk to the firm's creditors, even though this risk could be borne more efficiently by derivative counterparties. In addition, because super-senior derivatives dilute existing creditors, they may lead firms to take on derivative positions that are too large from a social perspective. Hence, derivatives markets may grow inefficiently large in equilibrium.
主题Financial Economics ; Financial Institutions ; Corporate Finance
URLhttps://www.nber.org/papers/w17599
来源智库National Bureau of Economic Research (United States)
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条目标识符http://119.78.100.153/handle/2XGU8XDN/575274
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Patrick Bolton,Martin Oehmke. Should Derivatives be Privileged in Bankruptcy?. 2011.
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