Our paper studies the role of the collateral channel for bank credit using confidential bank-firm-loan data. We estimate that for a 1 percent increase in collateral values, firms pledging real estate collateral experience a 12 basis point higher growth in bank lending with higher sensitivities...

Credit default swaps (CDS) are the most common type of credit derivative. This paper provides a brief history of the CDS market and discusses its main characteristics. After describing the basic mechanics of a CDS, I present a simple valuation framework that focuses on the relationship between...

We study the links between sovereign credit risk and the currency forward bias. In a setting of defaultable sovereign bonds, we show that the forward bias can be linked negatively to sovereign credit risk. We confirm empirically that the forward bias is negatively associated to sovereign CDS...

We examine how firms’ carbon risk management practices influence market assessment of their credit risk. Using two quasi-exogenous events involving the 2015 Paris Climate Agreement and the staggered implementation of US state climate adaptation plans, we find that stronger carbon risk...

In this paper, we study systemic risk in China using information from credit default swap (CDS) data of Chinese firms. We find a large time variation in CDS spreads. More importantly, firms’ CDS spreads co-move with each other and the first three principal components explain 94% of the...

We examine the effect of credit default swaps (CDS) trading on debt specialization. We argue that reference firms in CDS contracts exhibit higher debt concentration in comparison to firms that do not have CDS traded on them as a way to minimize creditor conflicts and costs in bankruptcy. Our...

The European low-carbon transition started in the last decades and is accelerating to reach net-zero by 2050. I study how the climate-related transition risk of a European large corporate firm relates to its CDS-implied credit risk for different time horizons. I find that firms with higher GHG...

Our paper studies the role of the collateral channel for bank credit using a confidential bank-firm-loan data set. We find that the use of real estate collateral is concentrated in private bank-dependent borrowers and in markets with low real estate supply elasticities. We identify the...

This paper examines how credit default swaps (CDS) affect the corporate investment of the referenced entities. We document a significant reduction in corporate investment after CDS trading, a result that is robust to alternative model specifications and a set of endogeneity tests. Our findings...

We study the relation between a country's performance on the United Nations' Sustainable Development Goals (SDGs) and its sovereign bond spread. Using a novel country-level SDG measure for a global sample of countries, we find a significantly negative relation between SDG performance and credit...