Showing 1 - 10 of 7,632
We develop a model of endogenous maturity structure for financial institutions that borrow from multiple creditors. We … show that a maturity rat race can occur: an individual creditor can have an incentive to shorten the maturity of his own …, causes all other lenders to shorten their maturity as well, leading to excessively short-term financing. This rat race occurs …
Persistent link: https://www.econbiz.de/10013135060
liquidity, which depends on both the firm fundamental and the time-to-maturity of the bond. Corporate default decisions interact … premium and default premium for credit spreads, we also study the optimal maturity implied by the model based on the tradeoff …
Persistent link: https://www.econbiz.de/10013100361
portfolios sorted by maturity and credit risk as measured by the issuer's "distance-to-default." The portfolios are constructed …
Persistent link: https://www.econbiz.de/10013130981
We study the interactions between sovereign debt default and maturity choice in a setting with limited commitment for …-term bond market. We show that any attempt to manipulate the existing maturity profile of outstanding long-term bonds generates …
Persistent link: https://www.econbiz.de/10012978844
We ask why so few student loan borrowers enroll in Income Driven Repayment when the majority would benefit from doing so. To do so we run an incentivized laboratory experiment using a facsimile of the government's Student Loan Exit Counseling website. We test the role information complexity,...
Persistent link: https://www.econbiz.de/10012907768
This paper solves a dynamic model of a household's decision to default on its mortgage, taking into account labor income, house price, inflation, and interest rate risk. Mortgage default is triggered by negative home equity, which results from declining house prices in a low inflation...
Persistent link: https://www.econbiz.de/10013119572
Empirical tests of reduced form models of default attribute a large fraction of observed credit spreads to compensation for jump-to-default risk. However, these models preclude a "contagion-risk'' channel, where the aggregate corporate bond index reacts adversely to a credit event. In this...
Persistent link: https://www.econbiz.de/10013148003
The crisis of 2007-09 has been characterized by a sudden freeze in the market for short-term, secured borrowing. We present a model that can explain a sudden collapse in the amount that can be borrowed against finitely-lived assets with little credit risk. The borrowing in this model takes the...
Persistent link: https://www.econbiz.de/10013148660
market liquidity and shorter debt maturity can exacerbate this externality and cause costly firm bankruptcy at higher … optimal debt maturity structures …
Persistent link: https://www.econbiz.de/10013148863
Intuition suggests that firms with higher cash holdings are safer and should have lower credit spreads. Yet empirically, the correlation between cash and spreads is robustly positive and higher for lower credit ratings. This puzzling finding can be explained by the precautionary motive for...
Persistent link: https://www.econbiz.de/10013125920