Should derivatives be privileged in bankruptcy?

• Autores: Patrick Bolton, Martin Oehmke
• Localización: The Journal of finance, ISSN 0022-1082, Vol. 70, Nº 6, 2015, págs. 2353-2394
• Idioma: inglés
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• Dialnet Métricas: 2 Citas
• Resumen

  • Derivatives enjoy special status in bankruptcy: they are exempt from the automatic stay and effectively senior to virtually all other claims. We propose a corporate finance model to assess the effect of these exemptions on a firm's cost of borrowing and incentives to engage in derivative transactions. While derivatives are value-enhancing risk management tools, seniority for derivatives can lead to inefficiencies: it transfers credit risk to debtholders, even though this risk is borne more efficiently in the derivative market. Seniority for derivatives is efficient only if it provides sufficient cross-netting benefits to derivative counterparties that provide hedging services