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Persistent link: https://www.econbiz.de/10005257948
Credit default swaps (CDSs) are thought to ease borrowing by protecting lenders against default. This paper develops a model of the demand for CDS when borrowers choose the riskiness of investment and verification is imperfect. The model shows that CDSs may lead to risk-shifting, increasing the...
Persistent link: https://www.econbiz.de/10010594164