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Pricing and usage: An empirical analysis of lines of credit

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  • Duran, Miguel A.

Abstract

The hypothesis that committed revolving credit lines with fixed spreads can provide firms with interest rate insurance is a standard feature of models on these credit facilities’ interest rate structure. Nevertheless, this hypothesis has not been tested. Its empirical examination is the main contribution of this paper. To perform this analysis, and given the unavailability of data, we hand-collect data on usage at the credit line level itself. The resulting dataset enables us also to take into account characteristics of credit lines that have been ignored by previous research. One of them is that credit lines can have simultaneously fixed and performance-based spreads.

Suggested Citation

  • Duran, Miguel A., 2017. "Pricing and usage: An empirical analysis of lines of credit," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 50(C), pages 219-234.
    • Handle: RePEc:eee:intfin:v:50:y:2017:i:c:p:219-234
    DOI: 10.1016/j.intfin.2017.08.012
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    More about this item

    Keywords

    Financial distress; Interest rate insurance; Pricing; Revolving credit lines; Usage;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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