Credit Risk Spreads in Local and Foreign Currencies

Credit Risk Spreads in Local and Foreign Currencies
The paper shows how-in a Merton-type model with bankruptcy-the currency composition of debt changes the risk profile of a company raising a given amount of financing, and thus affects the cost of debt. Foreign currency borrowing is cheaper when the exchange rate is positively correlated with the return on the company's assets, even if the... READ MORE...

Publication date: May 2009
ISBN 9781451872576
$18.00

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