Liquidation Value and Loan Pricing

Francesca Barbiero, Glenn Schepens and Jean‐david Sigaux

Journal of Finance, 2024, vol. 79, issue 1, 95-128

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.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/jofi.13291

Related works:
Working Paper: Liquidation value and loan pricing (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:79:y:2024:i:1:p:95-128

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().