1 option
Rollover Risk and Credit Risk / Zhiguo He, Wei Xiong.
- Format:
- Book
- Author/Creator:
- He, Zhiguo.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w15653.
- NBER working paper series no. w15653
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2010.
- Summary:
- This paper models a firm's rollover risk generated by conflict of interest between debt and equity holders. When the firm faces losses in rolling over its maturing debt, its equity holders are willing to absorb the losses only if the option value of keeping the firm alive justifies the cost of paying off the maturing debt. Our model shows that both deteriorating market liquidity and shorter debt maturity can exacerbate this externality and cause costly firm bankruptcy at higher fundamental thresholds. Our model provides implications on liquidity-spillover effects, the flight-to-quality phenomenon, and optimal debt maturity structures.
- Notes:
- Print version record
- January 2010.
The Penn Libraries is committed to describing library materials using current, accurate, and responsible language. If you discover outdated or inaccurate language, please fill out this feedback form to report it and suggest alternative language.