Insured Bond Pricing in the Biggest Municipal Bankruptcy in History: The Case of Detroit
Posted: 20 Jul 2016
Date Written: June 27, 2016
This case study finds evidence that stricter state interference in the financial affairs of a distressed government (that increases the likely payoff to its own creditors) raises the default risk of nearby municipalities. Economically related municipalities are found to be adversely impacted by a deterioration in the economic situation of financially associated local governments caused by actions interfering with the operation of the distressed municipality for the benefit of its creditors.
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