Counterparty credit risk has become one of the highest-profile risks facing participants in the financial markets. Despite this, relatively little is known about how counterparty credit risk is actually priced. We examine this issue using an extensive proprietary data set of contemporaneous CDS...

We study the nature of sovereign credit risk using an extensive set of sovereign CDS data. We find that the majority of sovereign credit risk can be linked to global factors. A single principal component accounts for 64 percent of the variation in sovereign credit spreads. Furthermore, sovereign...

Many classes of assets are illiquid or nonmarketable in that they cannot always be traded immediately. Thus, a portfolio position in these becomes at least temporarily irreversible. We study the asset-pricing implications of this type of illiquidity in an exchange economy with heterogeneous...

This article studies the central role of the credit market. We show that the credit market facilitates optimal risk sharing by allowing less risk-averse investors to take on levered positions and consume more risk. The equilibrium amount behaves procyclically when aggregate consumption is low...

This article studies the central role of the credit market. We show that the credit market facilitates optimal risk sharing by allowing less risk-averse investors to take on levered positions and consume more risk. The equilibrium amount behaves procyclically when aggregate consumption is low...