little credit risk. The borrowing in this model takes the form of a repurchase agreement ("repo") or asset-backed commercial …" (the information state gets worse), or "no news" (the information state remains the same). When rollover risk is high … during the crisis for asset-backed securities with low credit risk once bad news about the underlying cash flows arrived …

worsen, debt induces firms to risk-shift; this limits their funding liquidity and their ability to roll over debt. Firms may …