We construct a theoretical framework to investigate the impact of liquidity risk, in the secondary corporate debt market, on corporate risk-taking preferences. Using closed-form solutions, our model shows that equity holders choose to adopt high-risk projects upon the arrival of illiquidity...

This paper empirically tests five structural models of corporate bond pricing: Those of Merton (1974), Geske (1977), Leland and Toft (1996), Longstaff and Schwartz (1995), and Collin-Dufresne and Goldstein (2001). We implement the models using a sample of 182 bond prices from firms with simple...

The rapid growth of the credit default swap (CDS) market and the increased number of defaults in recent years have led to major changes in the way CDS contracts are settled when default occurs. Auctions are increasingly the mechanism used to settle these contracts, replacing physical transfers...

The rapid growth of the credit default swap (CDS) market and the increased number of defaults in recent years have led to major changes in the way CDS contracts are settled when default occurs. Auctions are increasingly the mechanism used to settle these contracts, replacing physical transfers...

The rapid growth of the credit default swap (CDS) market and the increased number of defaults in recent years have led to major changes in the way CDS contracts are settled when default occurs. Auctions are increasingly the mechanism used to settle these contracts, replacing physical transfers...