Liquidity and Credit Risk

The authors develop a simple binomial model of liquidity and credit risk in which a bondholder has the option to time the sale of his security, given a distribution of potential buyers, bids and liquidity shocks.

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Year of publication:	2001-08-01
Authors:	Ericsson, Jan ; Renault, Olivier
Publisher:	International Center for Financial Asset Management and Engineering <Genève>
Subject:	Kreditrisiko \| Spread \| Liquiditätsrisiko \| Empirische Forschung \| empirical research

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Table of Contents
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The Model
Results in the defaultn risk-free case
Results in the default-risky case
Bondholder trading behaviour
Dealer trading behaviour
Testing the model´s predictions
Concluding remarks

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