Publications
Publications
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- 2025
- Working Paper
Tax Planning, Illiquidity, and Credit Risks: Evidence from DeFi Lending
By: Lisa De Simone, Peiyi Jin and Daniel Rabetti
This study establishes a plausible causal link between tax-planning-induced illiquidity and credit risks in lending markets. Exploiting an exogenous tax shock imposed by the Internal Revenue Service (IRS) on cryptocurrency gains, along with millions of transactions in... View Details
- January 2025
- Supplement
Negotiating a Legacy at Sustainable Harvest (B)
By: Jillian Jordan, Julian Zlatev, Alicia Dadlani and Martha Hostetter
The specialty coffee importer Sustainable Harvest was the first certified B Corp in the coffee industry due to its investments in building coffee farmers’ capacity and livelihood. But in 2022, after coffee prices plummeted and the company’s bank declined to extend its... View Details
- October 2024
- Case
Estímulo: Blended Finance in Brazil
By: Vikram S. Gandhi, James Barnett, Maxim Pike Harrell and Marina Osborn
In December 2022, Estímulo—a Brazilian impact investment fund supporting small businesses—found itself at a crossroads. The fund was established in 2020 to provide emergency relief through accessible credit and financial education. When low default rates from borrowers... View Details
- June 2024
- Article
Counterparty Risk and Counterparty Choice in the Credit Default Swap Market
By: Wenxin Du, Salil Gadgil, Michael Gordy and Clara Vega
We investigate how market participants price and manage counterparty credit risk using confidential trade repository data on single-name credit default swap (CDS) transactions. We find that counterparty risk has a modest impact on the pricing of CDS contracts but a... View Details
- April 2024
- Article
Demand-and-Supply Imbalance Risk and Long-Term Swap Spreads
By: Samuel G. Hanson, Aytek Malkhozov and Gyuri Venter
We develop and test a model in which swap spreads are determined by end users' demand for
and constrained intermediaries’ supply of long-term interest rate swaps. Swap spreads reflect
compensation both for using scarce intermediary capital and for bearing convergence... View Details
- 2025
- Working Paper
Precautionary Debt Capacity
By: Deniz Aydin and Olivia S. Kim
The determinants of debt capacity are a central theme in finance and macroeconomics, yet it remains unclear why firms leave some of their debt capacity unused and whether this affects investment and growth. Textbook theory suggests that firms should not leave their... View Details
- 2024
- Working Paper
Does Pension Automatic Enrollment Increase Debt? Evidence from a Large-Scale Natural Experiment
By: John Beshears, Matthew Blakstad, James J. Choi, Christopher Firth, John Gathergood, David Laibson, Richard Notley, Jesal D. Sheth, Will Sandbrook and Neil Stewart
Does automatic enrollment into retirement saving increase household debt? We study the randomized roll-out of automatic enrollment pensions to ~160,000 employers in the United Kingdom with 2-29 employees. We find that the additional savings generated through automatic... View Details
- February 2023
- Article
Disruption and Credit Markets
By: Bo Becker and Victoria Ivashina
We show that over the past half century innovative disruptions were central to understanding corporate defaults. In a given year, industries experiencing abnormally high VC or IPO activity subsequently see higher default rates, higher segment exits by conglomerates,... View Details
- February 2023
- Article
OTC Intermediaries
By: Andrea L. Eisfeldt, Bernard Herskovic, Sriram Rajan and Emil Siriwardane
We study the effect of dealer exit on prices and quantities in a model of an over-the-counter (OTC) market featuring a core-periphery network with bilateral trading costs. The model is calibrated using regulatory data on the entire U.S. credit default swap (CDS) market... View Details
- October 2022
- Article
Sovereign Risk, Currency Risk, and Corporate Balance Sheets
By: Wenxin Du and Jesse Schreger
We provide a comprehensive account of the evolution of the currency composition of sovereign and corporate external borrowing by emerging markets from 2003 to 2017. We show that a higher reliance on foreign currency debt by the corporate sector is associated with... View Details
- July 2021 (Revised December 2021)
- Case
Pershing Square's Pandemic Trade (A)
By: Emil N. Siriwardane, Luis M. Viceira, Dean Xu and Lucas Baker
This case explores the decision that Bill Ackman, CEO and founder of the hedge fund Pershing Square Capital, was considering in late February 2020 about hedging the exposure of the fund’s portfolio from the potential financial fallout ensuing from an extreme event like... View Details
- Article
CDS Trading and Nonrelationship Lending Dynamics
By: Jung Koo Kang, Christopher Williams and Regina Wittenberg-Moerman
We investigate how credit default swaps (CDSs) affect lenders’ incentives to initiate new lending relationships. We predict that CDSs reduce adverse selection that nonrelationship lead arrangers face when competing for loans. Consistently, we find that a loan is... View Details
- February 2021
- Article
A Dynamic Theory of Multiple Borrowing
By: Daniel Green and Ernest Liu
Multiple borrowing—a borrower obtains overlapping loans from multiple lenders—is a common phenomenon in many credit markets. We build a highly tractable, dynamic model of multiple borrowing and show that, because overlapping creditors may impose default externalities... View Details
- October 2020
- Case
HOPE and Transformational Lending: Netflix Invests in Black Led Banks
By: John D. Macomber and Janice Broome Brooks
Following the killing of George Floyd on Memorial Day in 2020, the large US corporation Netflix elected to make a "transformational deposit" of $10 million into Hope Credit Union (HCU), a small Black led community development finance institution (CDFI) based in... View Details
- 2020
- Working Paper
The Effects of Information on Credit Market Competition: Evidence from Credit Cards
By: C. Fritz Foley, Agustin Hurtado, Andres Liberman and Alberto Sepulveda
We show empirically that public credit information increases competition in credit markets. We access data that cover all credit card borrowers in Chile and include details about relationship borrowers have with each lender. We exploit a natural experiment whereby a... View Details
- October 2019
- Article
Limited Investment Capital and Credit Spreads
Using proprietary credit default swap (CDS) data, I investigate how capital shocks at protection sellers impact pricing in the CDS market. Seller capital shocks—measured as CDS portfolio margin payments—account for 12% of the time-series variation in weekly spread... View Details
- July 2019
- Article
Optimal Capital Structure and Bankruptcy Choice: Dynamic Bargaining vs Liquidation
By: Samuel Antill and Steven R. Grenadier
We model a firm’s optimal capital structure decision in a framework in which it may later choose to enter either Chapter 11 reorganization or Chapter 7 liquidation. Creditors anticipate equityholders’ ex-post reorganization incentives and price them into the ex-ante... View Details
- 2018
- Working Paper
OTC Intermediaries
By: Andrea L. Eisfeldt, Bernard Herskovic, Sriram Rajan and Emil Siriwardane
Over-the-counter (OTC) markets for financial assets are dominated by a relatively small number of core intermediaries and a large number of peripheral customers. In this paper, we develop a model of trade in a core-periphery network and estimate its key structural... View Details
- May 2018
- Article
U.S. Treasury Premium
By: Wenxin Du, Joanne Im and Jesse Schreger
We quantify the difference in the convenience yield of U.S. Treasuries and government bonds of other developed countries by measuring the deviation from covered interest parity between government bond yields. We call this wedge the “U.S. Treasury Premium.” We document... View Details
- August 2017 (Revised February 2024)
- Teaching Note
Exotic Interest Rate Swaps: Snowballs in Portugal
By: Boris Vallee, Patrick Augustin and Philippe Rich
This case explores a complex swap transaction implemented by Metro do Porto in 2007. It represents an opportunity to study fixed income derivative instruments, such as plain-vanilla swaps and structured swaps, as well as understand the opportunities and challenges of... View Details