Limited liability debt financing of irreversible investments can affect investment timing through an entrepreneur …'s option value, even after compensating a lender for expected default losses. This non-neutrality of debt arises from an … truncating the lower tail of risks, thereby lowering the investment threshold. Compensating the lender for expected default …

investment dynamics with partial commitment drastically differ from those with full and no commitment. In particular, investment …

recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large … capital gain, the return on capital and the interest rate. An optimal debt ratio is derived where the drift is probabilistic …, does not depend upon the actual debt/net worth per se. Instead it increases in proportion to the difference between the …

leverage, the optimum and excessive risk and the probability of a debt crisis. The theoretically founded early warning signals … crisis ; optimal leverage and debt ratios ; Congressional Oversight Panel ; Case-Shiller index …

Money, which provides liquidity, is distinct from debt. The introduction of a bank that issues money in exchange for … debt and pays out its profit as dividend to shareholders modifies the model of overlapping generations. Monetary policy can …

Debt can increase economic growth as it allows the households and firms to increase consumption and investment. However …, high reliance on debt adversely affects economy as it can cause debt-deflationary recession, balance sheet recession …