This paper documents the pricing of liquidity and identifies its drivers in the four main segments of the interbank and exchange credit bond markets in China. First, we find that liquidity effects are priced in credit bond yield spreads, and differ significantly across these four segments....

We study the impact of sovereign bond auctions on secondary markets and their feedback to the sovereigns' debt cost. This linkage is established through the actions of primary dealers, participating in the auctions, and also acting as market-makers. We model financially-constrained primary...

We analyze the impact of the introduction of credit default swaps (CDS) on real decision making within the firm and the influence of firms' local economic and legal environments on that impact. We extend the model of Bolton and Oehmke (2011) to take into account uncertainty about whether the...

The COVID-19 pandemic provides a unique setting in which to evaluate the importance of a country's fiscal capacity in explaining the relation between economic growth shocks and sovereign default risk. For a sample of 30 developed countries, we find a positive and significant sensitivity of...

We forecast the drop in profits and the equity shortfall triggered by the COVID-19 lockdown, using a representative sample of 80,972 Italian firms. A 3-month lockdown entails an aggregate yearly drop in profits of about 10% of GDP and results in financial distress for 17% of the sample firms,...