> If OpenAI goes bankrupt, JPMC will get more than 0 on their loan.
Depends what other creditors OpenAI has, and the priority on their claims.
>For some reason I have yet to comprehend, when I was sitting on a credit desk pricing CDS, they always used 40% as the recovery rate.
That doesn't mean its the actual amount they will recover, just that it is sonething like the expected average for a large class given the criteria JPMC uses when entering such a position and the anticipated range and distribution of outcomes when those firms fail.
This, and thanks to certain loopholes in the U.S., it is possible that JPMC may receive nothing at all. Depending on the jurisdiction, companies have been known to sell off all assets for near zero and eventually leave creditors and investors on the hook.
Do you have examples of this? I would like to learn more.
A quick Google search tells me:
> Generally, a U.S. company can sell assets below cost, as long as the transaction is transparent, conducted in good faith, and serves a legitimate business purpose.
Depends what other creditors OpenAI has, and the priority on their claims.
>For some reason I have yet to comprehend, when I was sitting on a credit desk pricing CDS, they always used 40% as the recovery rate.
That doesn't mean its the actual amount they will recover, just that it is sonething like the expected average for a large class given the criteria JPMC uses when entering such a position and the anticipated range and distribution of outcomes when those firms fail.