An implication of the incompleteness of contracts is that there are going to be gaps and ambiguities that either side can exploit. We ask whether the expectation that a counterparty is likely to act aggressively in its use of contract language impacts the price that market participants attach to that contract. To do our analysis, we look at how markets price contract terms for the perennial “bad boy” of the sovereign debt markets, the Republic of Argentina. The results are consistent with a market penalty for cheeky contracting.

The price of cheeky contracting

Colla, Paolo
;
2022

Abstract

An implication of the incompleteness of contracts is that there are going to be gaps and ambiguities that either side can exploit. We ask whether the expectation that a counterparty is likely to act aggressively in its use of contract language impacts the price that market participants attach to that contract. To do our analysis, we look at how markets price contract terms for the perennial “bad boy” of the sovereign debt markets, the Republic of Argentina. The results are consistent with a market penalty for cheeky contracting.
2022
2022
Colla, Paolo; Gulati, Mitu
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4048668
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