In this paper we review the pricing and model calibration of Credit Default Swaps referring to both the International Swaps and Derivatives Association (ISDA) CDS contract and credit model standardization guidelines. Furthermore we provide an Excel pricing workbook to supplement the materials...

This paper internalizes a new approach to measure the direct and pure impact of credit rating changes on the cost of debt. We analyze loan contracts with rating-based performance pricing (RBPP) provisions. They ex ante link interest spreads to the credit ratings. We examine a large sample of...

We find that Credit Rating Agencies (CRAs) see through transitory shocks to credit risk that stem from transitory shocks to equity prices, while market-based measures of credit risk do not. For a given stock return, CRAs are significantly less likely to downgrade firms with transitory shocks...

We analyse whether soliciting multiple ratings leads to lower syndicated loan spreads. Our results document that banks apply, on average, lower spreads to multi-rated firms. This effect depends on the reduction of information asymmetry about borrowers' creditworthiness (information production...

Creditors are increasingly transferring debt cash flow rights to other market participants while retaining control rights. We use the market for credit default swaps (CDSs) as a laboratory to show that such debt decoupling causes large adverse effects on firms whose shareholders have high...

Does the ability of suppliers of corporate debt capital to hedge risk through credit default swap (CDS) contracts impact firms' capital structures? We find that firms with traded CDS contracts on their debt are able to maintain higher leverage ratios and longer debt maturities. This is...

We empirically examine three channels in the relation between banks' CDS trading and loan sales. The substitute channel predicts a negative relation between CDS hedging and loan sales, and the complementary channel predicts a positive relation. The credit-enhancement channel predicts a positive...

We analyze how Credit Default Swaps (CDS) affect bank incentives and borrower outcomes in renegotiations after covenant violations. Using a regression-discontinuity design and within lender-borrower variation, we find that CDS firms maintain investment after control rights shift to the creditor,...

We examine how accounting-based compensation plans influence a firm's contracts with its creditors. After granting long-term accounting-based compensation plans (LTAPs) to CEOs, firms pay lower spreads and have fewer restrictive covenants in new bank loans. Mechanisms leading to lower borrowing...

This paper studies the use of psychometric tests, designed by the Entrepreneurial Finance Lab (EFL), as a tool to screen out high credit risk and potentially increase access to credit for small business owners in Peru. We use administrative data covering the period from June 2011 to April 2014...