Rollover Risk and Market Freezes

SELF - FULFILLING CREDIT MARKET FREEZES Lucian

Disclosure and Rollover Risk

This paper studies whether and to what extent transparent disclosure prevents inefficient liquidation arising from rollover risk. We model an illiquid but solvent borrower who can design a public signal about what creditors can recover from forcing liquidation, and what their claims would be worth if the firm survives. We find that the signal structure that minimizes rollover risk never identif...

Uncertainty in an Interconnected Financial System, Contagion, and Market Freezes

This paper studies contagion and market freezes caused by uncertainty in financial network structures and provides theoretical guidance for central banks. We establish a formal model to demonstrate that, in a financial system where financial institutions are interconnected, a negative shock to an individual financial institution could spread to other institutions, causing market freezes because...

Optimal Debt Maturity Structure, Rollover Risk and Strategic Uncertainty

This paper analyzes debt maturity structure for a borrower in a setting where creditors are faced with strategic uncertainty. In contrast to the existing literature, I examine the e¤ects of strategic uncertainty on the issuance of debt in an environment where face values of debt are determined endogenously and directly a¤ect investors’ rollover decisions. I …nd that strategic uncertainty has a ...

Rollover risk and the maturity transformation function of banks