We construct a new credit spread index, employing an extensive micro-level data set of secondary market prices of outstanding senior unsecured bonds over the 1973– 2009 period. Compared with the standard default-risk indicators such as the Baa-Aaa corporate bond spread and the paper-bill spread, our credit spread index is a robust predictor of future economic activity across a variety of econom...

We study the effect of risk aversion on the valuation of credit derivatives. Using the technology of utility-indifference valuation in intensity-based models of default risk, we analyze resulting yield spreads for single-name defaultable bonds, and a simple representative two-name credit derivative. The impact of risk averse valuation on prices and yield spreads is expressed in terms of effecti...

Managing income is a considerable dimension in supply chain management in current economic atmosphere. Real world situation makes it inevitable not to design or redesign supply chain. Redesign will take place as costs increase or new services for customers’ new demands should be provided. Pricing is an important fragment of Supply chain due to two reasons: first, represents revenue based ...

T paper has two objectives. First, we show how debt financing distorts a retailer’s inventory decision when the retailer orders multiple items that differ in cost, revenue, or demand parameters. Taking advantage of limited liability, a debt-financed retailer favors items with a low salvage value, those with a high profit margin, and those that represent a large proportion of the total inventory...

In this article, we develop an integrated supplier–buyer inventory model with the assumption that the market demand is sensitive to the retail price and the supplier adopts a trade credit policy. The trade credit policy discussed in this paper is a ‘‘two-part’’ strategy: cash discount and delayed payment. That is, if the buyer pays within M1, the buyer receives a cash discount; otherwise, the f...

We analyze the impact credit constraints have on how firms structure their dealings with their partners in the supply chain; and hence how imperfect capital markets can alter short run prices and long run investment levels. Credit constrained firms are shown to become endogenously risk averse and so seek to push some risk onto suppliers. Our predictions reflect risk sharing contracts in general...

Email: [email protected] Abstract: Many researchers have assumed one stage trade credit financing. In this study, we considered two levels of trade credit policy using Discounted Cash Flow (DCF) approach. Demand rate is considered to be stock-dependent for the first level (credit demand) and constant for second level (cash demand). Mathematical models are derived under two differen...

During the recent U.S. financial crisis, the large decline in economic activity and credit was accompanied by a large increase in the dispersion of growth rates across firms. However, even though aggregate labor and output fell sharply during this period, labor productivity did not. These features motivate us to build a model in which increased volatility at the firm level generates a downturn ...