increase volatility in order to exploit the implicit protection. However, if they increase volatility too much they may induce … that it allows high volatility choices, while net worth is high. However, risk limits tighten abruptly when the firm's net …

"Derivative contracts, swaps, and repos enjoy "super-senior" status in bankruptcy: they are exempt from the automatic …, even though this risk could be borne more efficiently by derivative counterparties. In addition, because super …-senior derivatives dilute existing creditors, they may lead firms to take on derivative positions that are too large from a social …

question, focusing on liquidity constraints and uninsurable idiosyncratic risk. We consider a search model where agents use … reserves and the response of the economy tends to be larger. In this case, agents expect to be liquidity constrained and, due …