White Paper

Collateralized Debt Networks with Lender Default

December 19, 2019

The Lehman Brothers' 2008 bankruptcy spread losses to its counterparties even when Lehman was a lender of cash, because collateral for that lending was tied up inthe bankruptcy process. Jin-Wook Change explores the implications of such lender default, using a model that takes into account counterparty risk, leverage and diversification, among other factors.