{"title":"Liquidation Value and Loan Pricing","authors":"FRANCESCA BARBIERO, GLENN SCHEPENS, JEAN-DAVID SIGAUX","doi":"10.1111/jofi.13291","DOIUrl":null,"url":null,"abstract":"<div>\n \n <p>This paper shows that the liquidation value of collateral depends on the interdependency between borrower and collateral risk. Using transaction-level data on short-term repurchase agreements (repo), we show that borrowers pay a premium of 1.1 to 2.6 basis points when their default risk is positively correlated with the risk of the collateral that they pledge. Moreover, we show that borrowers internalize this premium when making their collateral choices. Loan-level credit registry data suggest that the results extend to the corporate loan market as well.</p></div>","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"79 1","pages":"95-128"},"PeriodicalIF":7.6000,"publicationDate":"2023-11-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Finance","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/jofi.13291","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This paper shows that the liquidation value of collateral depends on the interdependency between borrower and collateral risk. Using transaction-level data on short-term repurchase agreements (repo), we show that borrowers pay a premium of 1.1 to 2.6 basis points when their default risk is positively correlated with the risk of the collateral that they pledge. Moreover, we show that borrowers internalize this premium when making their collateral choices. Loan-level credit registry data suggest that the results extend to the corporate loan market as well.
期刊介绍：
The Journal of Finance is a renowned publication that disseminates cutting-edge research across all major fields of financial inquiry. Widely regarded as the most cited academic journal in finance, each issue reaches over 8,000 academics, finance professionals, libraries, government entities, and financial institutions worldwide. Published bi-monthly, the journal serves as the official publication of The American Finance Association, the premier academic organization dedicated to advancing knowledge and understanding in financial economics. Join us in exploring the forefront of financial research and scholarship.
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