Clustered Pricing in the Corporate Loan Market: Theory and Empirical Evidence

Elnaz Bajoori, Shasikanta Nandeibam, Sajid Mukhtar Chaudhry

Research output: Working paper

133 Downloads (Pure)

Abstract

Existing theories explaining security price clustering as well as clustering in the retail depositand mortgage markets are incompatible with the clustering in the corporate loan market. Wedevelop a new theoretical argument that the attitude of the lender toward the uncertaintyabout the quality of the borrower leads to the clustering of spreads. Our empirical resultssupport these arguments and we find that clustering increases with the degree of uncertaintybetween the lender and the borrower. In contrast, clustering is less likely when the uncertaintyabout the quality of the borrower has been reduced through repeated access and through priorinteractions of the lender and the borrower.
Original languageEnglish
Place of PublicationBath, U. K.
Publication statusPublished - 10 Jul 2016

Publication series

NameBath Economics Research Working Papers
Volume57/17

Fingerprint

Clustering
Loans
Pricing
Empirical evidence
Mortgage market
Retail
Price clustering
Security price

Cite this

Bajoori, E., Nandeibam, S., & Chaudhry, S. M. (2016). Clustered Pricing in the Corporate Loan Market: Theory and Empirical Evidence. (Bath Economics Research Working Papers; Vol. 57/17). Bath, U. K.

Clustered Pricing in the Corporate Loan Market: Theory and Empirical Evidence. / Bajoori, Elnaz; Nandeibam, Shasikanta; Chaudhry, Sajid Mukhtar .

Bath, U. K., 2016. (Bath Economics Research Working Papers; Vol. 57/17).

Research output: Working paper

Bajoori, E, Nandeibam, S & Chaudhry, SM 2016 'Clustered Pricing in the Corporate Loan Market: Theory and Empirical Evidence' Bath Economics Research Working Papers, vol. 57/17, Bath, U. K.
Bajoori E, Nandeibam S, Chaudhry SM. Clustered Pricing in the Corporate Loan Market: Theory and Empirical Evidence. Bath, U. K. 2016 Jul 10. (Bath Economics Research Working Papers).
Bajoori, Elnaz ; Nandeibam, Shasikanta ; Chaudhry, Sajid Mukhtar . / Clustered Pricing in the Corporate Loan Market: Theory and Empirical Evidence. Bath, U. K., 2016. (Bath Economics Research Working Papers).
@techreport{a9537b838b874001bc79325e042b2adc,
title = "Clustered Pricing in the Corporate Loan Market: Theory and Empirical Evidence",
abstract = "Existing theories explaining security price clustering as well as clustering in the retail depositand mortgage markets are incompatible with the clustering in the corporate loan market. Wedevelop a new theoretical argument that the attitude of the lender toward the uncertaintyabout the quality of the borrower leads to the clustering of spreads. Our empirical resultssupport these arguments and we find that clustering increases with the degree of uncertaintybetween the lender and the borrower. In contrast, clustering is less likely when the uncertaintyabout the quality of the borrower has been reduced through repeated access and through priorinteractions of the lender and the borrower.",
author = "Elnaz Bajoori and Shasikanta Nandeibam and Chaudhry, {Sajid Mukhtar}",
note = "Working Paper no. 57/17",
year = "2016",
month = "7",
day = "10",
language = "English",
series = "Bath Economics Research Working Papers",
type = "WorkingPaper",

}

TY - UNPB

T1 - Clustered Pricing in the Corporate Loan Market: Theory and Empirical Evidence

AU - Bajoori, Elnaz

AU - Nandeibam, Shasikanta

AU - Chaudhry, Sajid Mukhtar

N1 - Working Paper no. 57/17

PY - 2016/7/10

Y1 - 2016/7/10

N2 - Existing theories explaining security price clustering as well as clustering in the retail depositand mortgage markets are incompatible with the clustering in the corporate loan market. Wedevelop a new theoretical argument that the attitude of the lender toward the uncertaintyabout the quality of the borrower leads to the clustering of spreads. Our empirical resultssupport these arguments and we find that clustering increases with the degree of uncertaintybetween the lender and the borrower. In contrast, clustering is less likely when the uncertaintyabout the quality of the borrower has been reduced through repeated access and through priorinteractions of the lender and the borrower.

AB - Existing theories explaining security price clustering as well as clustering in the retail depositand mortgage markets are incompatible with the clustering in the corporate loan market. Wedevelop a new theoretical argument that the attitude of the lender toward the uncertaintyabout the quality of the borrower leads to the clustering of spreads. Our empirical resultssupport these arguments and we find that clustering increases with the degree of uncertaintybetween the lender and the borrower. In contrast, clustering is less likely when the uncertaintyabout the quality of the borrower has been reduced through repeated access and through priorinteractions of the lender and the borrower.

M3 - Working paper

T3 - Bath Economics Research Working Papers

BT - Clustered Pricing in the Corporate Loan Market: Theory and Empirical Evidence

CY - Bath, U. K.

ER -