Is it true that if a borrower defaults and claims bankrupty, then creditor can file claims on both: a. “face value of current obligations” b. “present value of future obligations” Just was not sure about (b). Source: Schweser Practive Exams Vol 1 (Level 3) Problem 14.4
so its both? This isnt a question on Current vs Potential credit risk? Any idea where this is covered in the CFAI readings?
It’s both. For example, a couple of years ago when I was at a hedge fund that is no longer, we bought lots of leases in bankruptcy court. Suppose that you lease an airplane to someone who goes bankrupt and they give you the airplane back. You still have a claim on them because you signed a contract that says they owed you money for the use of the plane. That contract doesn’t automatically go away because they give the plane back.