{"title":"Spillover effects between liquidity risks through endogenous debt maturity","authors":"Xu Wei , Xiao Xiao , Yi Zhou , Yimin Zhou","doi":"10.1016/j.finmar.2023.100814","DOIUrl":null,"url":null,"abstract":"<div><p>We construct a model of debt maturity structure and show how a firm trades off between the costs of market liquidity risk and rollover risk. We show that an exogenous shock that directly increases one type of liquidity risk would induce the firm to alter its debt maturity structure and partially offset the impact of the shock by raising its exposure to the other type of risk (i.e., spillover effects exist). We also show that the spillover from market liquidity risk (rollover risk) to rollover risk (market liquidity risk) is more (less) pronounced during recessions or in competitive markets.</p></div>","PeriodicalId":47899,"journal":{"name":"Journal of Financial Markets","volume":"64 ","pages":"Article 100814"},"PeriodicalIF":2.1000,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"3","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Financial Markets","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1386418123000125","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 3
Abstract
We construct a model of debt maturity structure and show how a firm trades off between the costs of market liquidity risk and rollover risk. We show that an exogenous shock that directly increases one type of liquidity risk would induce the firm to alter its debt maturity structure and partially offset the impact of the shock by raising its exposure to the other type of risk (i.e., spillover effects exist). We also show that the spillover from market liquidity risk (rollover risk) to rollover risk (market liquidity risk) is more (less) pronounced during recessions or in competitive markets.
期刊介绍：
The Journal of Financial Markets publishes high quality original research on applied and theoretical issues related to securities trading and pricing. Area of coverage includes the analysis and design of trading mechanisms, optimal order placement strategies, the role of information in securities markets, financial intermediation as it relates to securities investments - for example, the structure of brokerage and mutual fund industries, and analyses of short and long run horizon price behaviour. The journal strives to maintain a balance between theoretical and empirical work, and aims to provide prompt and constructive reviews to paper submitters.
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