Collateral pricing
Name
Bergman_Collateral Pricing.pdf
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308.39 KB
Format
Adobe PDF
Checksum (MD5)
88223e320c40d167bd9243c3391b2ea4
Author(s)
Benmelech, Efraim
Bergman, Nittai
Date Issued
November 2008
Journal
Journal of Financial Economics
Publisher
Elsevier
Citation
Benmelech, Efraim, and Nittai K. Bergman. “Collateral pricing.” Journal of Financial Economics 91.3 (2009): 339-360.
Version
Author's final manuscript
Abstract
We examine how collateral affects the cost of debt capital. Using a novel data set of secured debt issued by U.S. airlines, we construct industry-specific measures of collateral redeployability. We show that debt tranches that are secured by more redeployable collateral exhibit lower credit spreads, higher credit ratings, and higher loan-to-value ratios—an effect which our estimates show to be economically sizeable. Our results suggest that the ability to pledge collateral, and in particular redeployable collateral, lowers the cost of external financing and increases debt capacity.
Subjects
collateral
redeployability
liquidation
collateralized debt obligations
airlines
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
http://dx.doi.org/10.1016/j.jfineco.2008.03.003
