In this paper, based on Acharya and Pedersen's overlapping generation model, we show that liquidity risk could … influence the market risk forecasting through at least two ways. Then we argue that traditional liquidity adjusted VaR measure …, the simply adding of the two risk measure, would underestimate the risk. Hence another approach, by modeling the liquidity …

quantitative model where firms make investment, financing, and default decisions subject to aggregate and idiosyncratic risk. Firms … profit opportunities and increases default risk for debtholders. Equityholders are protected against default risk due to the …

The study investigates the impact of financial distress (credit spread) and liquidity crises (TED spread) on size … premiums are associated with higher risk. The study then employs Auto-regressive distributed lag and Error Correction Modeling … to establish the long/short-run impact of financial distress and liquidity crisis on these premiums during recessionary …

We study the endogenous determination of corporate debt maturity in a setting with default risk. We assume that firms … projects with positive but small net present value, firms may be forced to default in the first phase. We call this liquidity … risk. The technology is such that earnings can switch to a higher (but riskier) level. In this second phase firms have …

, whilst removing credit risk transmission, systematically increase default risk …

This paper examines the effects of bond liquidity on firms' investments. We postulate that bond liquidity increases … variation in liquidity generated by the introduction of TRACE, we find that bond liquidity enables firms to expand capital … expenditures and acquisition activity. Furthermore, by enhancing access to funding, bond liquidity facilitates acquisition …

We propose and test a new channel that links funding liquidity risk and interest rates in short-term funding markets …. Borrowers with high liquidity risk are willing to pay a markup to lock in their funding, independent of risk premiums demanded … borrowers' funding liquidity risk that lead to systematic and persistent heterogeneity in funding costs. Our results have …

While empirical literature has documented a negative relation between default risk and stock returns, theory suggests …. In accordance with theory, we find that the systematic part, measured as the PD sensitivity to aggregate default risk, is … that default risk should be positively priced. In this paper, we calculate monthly probabilities of default (PDs) for a …

-levering procedure is around for the case of risk-free debt. The procedure for risky debt is much less clear even under very simplifying …

law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … market price of risk. We show empirically that a conditional CAPM that accounts for time variation in equity nonlinearity …Because levered equity is an option on the firm, variations in asset idiosyncratic risk (ivol) induces a negative …