Risk and liquidity in a system context

Hyun Song Shin

No 212, BIS Working Papers from Bank for International Settlements

Abstract: This 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.

Keywords: systemic risk; leverage; asset prices; liquidity (search for similar items in EconPapers)
JEL-codes: D5 G12 M4 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2006-08
New Economics Papers: this item is included in nep-acc and nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Risk and liquidity in a system context (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:212

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