Rating agencies are often criticized for being biased in favor of borrowers, for being too slow
to downgrade following credit quality deterioration, and for being oligopolists. Based on a …

This article studies performance-sensitive debt (PSD), the class of debt obligations whose
interest payments depend on some measure of the borrower's performance. We …

In the last decade rating-based models have become very popular in credit risk
management. These systems use the rating of a company as the decisive variable to …

Agency conflicts and asymmetric information are two possible explanations that may
rationalize the use of a step-up provision in the bond indenture. Within a continuous-time …

This paper investigates the pricing of step-up bonds, ie corporate bonds with provisions
stating that the coupon payments increase as the credit rating level of the issuer declines. To …

This paper examines the investment decision of a firm that uses performance-sensitive debt
(PSD) financing. Using a real-option model of investment, we show that PSD can mitigate …

Given the vast growth in credit default swap (CDS) market over the last few years, a dramatic
improvement is projected in pricing discovery of sovereign CDS as well as its interaction …

The introduction of the euro on January 1, 1999 created a large, single currency bond
market by merging eleven separate bond markets. The euro-denominated corporate bond …

Performance-sensitive debt (PSD) contracts link a loan's interest rate to a measure of the
borrower's credit relevant performance, eg if the borrower's debt to cash ow ratio …

Performance sensitive debt (PSD) contracts link the paid coupon to a measure of firm
performance. PSD contracts are widely used, especially as corporate bank loans. In a model …