This paper documents that the path of credit spreads since a firm's last loan influences the level at which it can currently borrow. If spreads have moved in the firm's favor (i.e., declined), it is charged a higher interest rate than is justified by current fundamentals, whereas if spreads have moved to the firm's detriment, it is charged a lower rate. We evaluate several possible explanations for this finding, and conclude that anchoring to past deal terms is most plausible.
The work to be presented here is taken principally from the three sources Steel [1977], Van Wesep [1977], and Wadge, listed in the bibliography.There is so far nothing published on this subject except the Van Wesep paper in the JSL.In Sections l, 2~ and 3 we provide a general picture of the Wadge degrees. In Section 4 we prove some results of Steel concerning functions from the Turing degrees to ~l modulo the Martin measure and apply them to a computation of the length of the Wadge ordering of A1 sets. Then in Section 5 we prove some results about the ~n separation~ reduction, and prewellordering, properties for suitable classes of sets of reals.We work throughout in ZF + DC +AD, but the reader will be able to determine when and how the determinateness assumption may be relaxed in proving corresponding results about restricted classes of sets of reals.
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