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to leverage, asset values, and asset liquidity, but less sensitive to the degree of maturity mismatch, the strength of …
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Liquidity backstops have important implications for financial stability. In this paper we provide a microfoundation for the important role of liquidity backstops in mitigating runs (or, conversely, the role of the lack of liquidity backstops in exacerbating runs) based on a dynamic model of debt...
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maturity. We find that in the absence of financing constraints short-term debt maximizes firm value. In contrast with most … revenues, issuing long term debt that expires after the investment option maturity. This effect, which is due to the option …
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the roles played by volatility, illiquidity and debt maturity in driving debt runs, as well as on firms' capital adequacy …
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