Economics and Finance

   

Balance Sheet and Seniority Constraints on the Repayment Value of Claims

Authors: Mauro Padellini

The problem is addressed of how (different types of) funding transactions may affect the repayment value of (credit or equity) claims; to this purpose a novel prove for the existence and uniqueness of the payment vector, which does not make (explicit) use of the fixed point theorem and allows for the presence of claims with different seniorities (i.e. credit and equity claims), is proposed. Different components of the overall displacement (the reduction of repayment value), related to i) seniority structure, ii) network of bilateral exposure and iii) imbalances between external loss and external capital, are calculated by sequentially relaxing different constraints in the mixed linear program used for calculating overall displacement. The possibility that more credit may reduce overall displacement (due to borrowing-from-Peter-to-pay-Paul effect) and more equity capital may on the contrary increase overall displacement (due to its role in the transmission of financial displacement) is exemplified, along with the possible negative dependence of relative displacement (the ratio between overall displacement and total claims) on total claims.

Comments: 47 Pages.

Download: PDF

Submission history

[v1] 2021-04-17 16:23:46

Unique-IP document downloads: 305 times

Vixra.org is a pre-print repository rather than a journal. Articles hosted may not yet have been verified by peer-review and should be treated as preliminary. In particular, anything that appears to include financial or legal advice or proposed medical treatments should be treated with due caution. Vixra.org will not be responsible for any consequences of actions that result from any form of use of any documents on this website.

Add your own feedback and questions here:
You are equally welcome to be positive or negative about any paper but please be polite. If you are being critical you must mention at least one specific error, otherwise your comment will be deleted as unhelpful.

comments powered by Disqus