Is bankruptcy costly

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining creditrelated spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs.

26p timxiao 22-07-2020 63 2   Download

In this study we estimate indirect bankruptcy costs for a recent sample of large corporate bankruptcies in the United States over the period, 1997 to 2004. We find indirect bankruptcy costs of approximately 2%, 6.2% and 14.9% of firm value in years -3, -2 and -1 relative to the year of bankruptcy announcement respectively. Together with the direct costs reported in Altman (1984), our results suggest total bankruptcy related costs around 6.09%, 9.71% and 17.43% of firm value over the corresponding three years.

30p nguyenminhlong19 21-04-2020 8 1   Download

This study indicates that there is no explicit evidence supporting the fact that banks in China lack strength and are exposed to the risk of bankruptcy. That is, the financial industry structure in China is healthy and an increased investment and facilities in this industry should be considered. However, the empirical results of the deposit insurance pricing model show that it is necessary to establish a deposit insurance system for the banks in China as all the estimated deposit insurance premiums are significantly positive.

16p trinhthamhodang2 21-01-2020 35 1   Download

Economic crises are historically times of industrial renewal. Less efficient firms fail while more dynamic ones emerge and expand. Creative destruction is an essential engine of long term efficiency in market economies, and it intensifies in downturns. Available data for many OECD countries point to a sharp increase in bankruptcies and business failures in recent months. New business models and new technologies, particularly those allowing a reduction in cost, often arise in downturns, as was the case with low-cost airlines which grew out of the recession of the early 1990s.

22p trinhcaidat 19-04-2013 62 3   Download

Finally, the individuals who are at the core of healthcare—patients—face challenges of their own. In early 2010, one out of seven U.S. citizens was uninsured or underin- sured—roughly 45 million people. 6 In addition, uninsured medical costs are the num- ber one cause of personal bankruptcy. 7 Without a doubt, healthcare is currently in a quality, safety, and cost crisis—one that exhibits symptoms at the individual, organizational, and societal level. However, we must acknowledge that this sense of crisis is not new.

6p lenh_hoi_xung 21-02-2013 53 3   Download

Nordbanken, which took over Gota Bank in 1993, is known today as Nordea Bank, of which the Swedish government still holds a 19.9 % stake. 14 In 2007, the revenues from several sources, dividends, selling of stock and a rising value of the government’s remaining equity stake, finally offset the cost of the bailout. That the bailout eventually paid for itself is attributable to the success of Sweden’s bad bank plan in minimizing losses on troubled assets.

33p enterroi 02-02-2013 54 3   Download

The first set of factors lower the cost of default. Default propensity is exaggerated by state laws providing for a greater amount of homestead protection or for less-than-full recourse on the defaulting borrowers by lenders. This is because they shield a greater proportion of the borrower’s wealth and income from capture by the lender post-default and, (if applicable), a subsequent bankruptcy.

142p enter1cai 16-01-2013 46 4   Download