BIS paper on risk and liquidity in system context

This BIS Working Paper explores the pricing of debt in a financial system where the assets that borrowers hold to meet their obligations include claims against other borrowers.

"Assessing financial claims in a system context captures features that are missing in a partial equilibrium setting. It is possible for spreads to fall as debts rise, as debt-fuelled increases in asset prices and stronger balance sheets reinforce each other. Conversely, it is possible that de-leveraging leads to increases

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