Government interventions in private debt negotiations could be more effective in preventing default waves if they accounted for the connections between lenders and borrowers across the debt chain, according to a new research paper by Wharton finance professor Vincent Glode and Christian Opp, associate professor of finance at the University of Rochester Simon Business School.
An efficient understanding of such connections would provide insights into debt default triggers and spot the right time for interventions, noted the paper titled Private Renegotiations and Government Interventions in Debt Chains. The papers model recognizes that economic shocks have varying effects on different entities across those debt chains, each of which has p…
Read the full article at: https://knowledge.wharton.upenn.edu/article/design-debt-relief-maximum-effect/
