Recent experience with financial crises has led to scepticism about the efficacy of crisis management measures that target short-term debt, such as the voluntary/concerted rollovers of interbank lines. Such measures, it is suggested, heighten financial fragility by encouraging creditors to...

We study a contracting model of leverage and balance sheet size for financial intermediaries that fund their activities through collateralized borrowing. Leverage and balance sheet size increase together when measured risks decrease. When the loss distribution is exponential, the behavior of...