Is a voluntary debt restructuring really voluntary?
Four years ago, in March 2007, three months before the start of the credit crisis, I tried to make my voice heard regarding the potential impending crisis in the credit derivatives world. I have written extensively about this in earlier entries, see Who listens to academics?, and my message from that blog can be summarized with the passage: …..I am just not convinced that the typical credit derivative is either (i) traded in a satisfactorily liquid market, (ii) well defined, or (iii) understood by all participants…… Most of you know that the first and last points have come true (clearing houses to replace OTC trading in CDSs and investors such as the commune of Narvik in Norway deafulting on their CDOs) but the second point has not been raised very much in media. The point was raised in my attempted newspaper article however: …..Moreover, there is evidence of the legal/operational interpretation of the contract-details occasionally being open for discussion. For instance, the exact de...