Che, Yeon-Koo; Sethi, Rajiv - In: American Economic Journal: Microeconomics 6 (2014) 4, pp. 1-34
We examine the effect of speculation using credit derivatives on the cost of debt and the likelihood of default. The availability of credit default swaps induces investors who are optimistic about borrower revenues to sell protection instead of buying bonds. This benefits borrowers if protection...
