In this paper we study the question what value an agent in a generalized Black-Scholes model with partial information attributes to the complementary information. To do this, we study the utility maximization problems from terminal wealth for the two cases partial information and full...

We develop a continuous-time model over business cycles to analyze the effects of credit default swap (CDS) trading on CDS firms’ financial decisions. We show that debtholders’ CDS hedging demand is procyclical. CDS trading postpones debt renegotiation and risktaking investment. CDS firms...

We develop a continuous-time model over business cycles to analyze the effects of credit default swap (CDS) trading on CDS firms’ financial decisions. We show that debtholders’ CDS hedging demand is procyclical. CDS trading postpones debt renegotiation and risktaking investment. CDS firms...