Total debt in the People’s Republic of China has increased significantly in recent years, mostly on account of nonfinancial corporate debt. Earning and the financial performance of corporate firms have weakened, and so has the asset quality of the financial sector. This paper assesses the...

We propose a redesign of sovereign Credit Default Swaps (CDS). Under our proposal, a notional CDS position of €100 can be settled by the delivery of whatever package of instruments a sovereign gives in exchange for legacy bonds with a face value of €100. To illustrate, suppose a European...

This paper studies the joint effect of conservatism and aggregation on the cost of equity capital and the e fficiency of debt contracts. In the model, a firm's two assets are valued at either the lower-of-cost-or-market or fair value and the accounting report aggregates the value of the two...