Funding liquidity, debt tenor structure, and creditor’s belief: an exogenous dynamic debt run model

详细信息    查看全文

• 作者：Gechun Liang ; Eva Lütkebohmert ; Wei Wei
• 关键词：Structural credit risk model ; Debt run ; Liquidity risk ; First passage time ; Optimal stopping time ; G01 ; G20 ; G32 ; G33
• 刊名：Mathematics and Financial Economics
• 出版年：2015
• 出版时间：October 2015
• 年：2015
• 卷：9
• 期：4
• 页码：271-302
• 全文大小：1,100 KB
• 参考文献：1.Adrian, T., Shin, H.S.: Liquidity and financial contagion. Banq. de Fr. Financ. Stab. Rev.: Spec Issue Liq. 11, 1- (2008)
  2.Adrian, T., Shin, H.S.: Liquidity and leverage. J. Financ. Intermed. 19(3), 418-37 (2010)CrossRef
  3.Arifovic, J., Jiang, J.H., Xu, Y.: Experimental evidence of bank runs as pure coordination failures. J. Econ. Dyn. Control 37(12), 2446-465 (2013)CrossRef MathSciNet
  4.Bielecki, T.R., Rutkowski, M.: Credit Risk: Modeling, Valuation and Hedging. Springer, Berlin (2002)
  5.Black, F., Cox, J.: Some effects of bond indenture provisions. J. Financ. 31, 351-67 (1976)CrossRef
  6.Briys, E., de Varenne, F.: Valuing risky fixed rate debt: an extension. J. Financ. Quant. Anal. 32, 239-49 (1997)CrossRef
  7.Brunnermeier, M.: Deciphering the liquidity and credit crunch 2007-8. J. Econ. Perspect. 23, 77-00 (2009)CrossRef
  8.Chen, N., Kou, S.: Credit spread, implied volatility, and optimal capital structures with jump risk and endogenous defaults. Math. Financ. 19, 343-78 (2009)CrossRef MathSciNet MATH
  9.Cheng, I.H., Milbradt, K.: The hazards of debt: rollover freezes, incentives, and bailouts. Rev. Financ. Stud. 25(4), 1070-110 (2012)CrossRef
  10.Crépey, S., Grbac, Z., Nguyen, H.N.: A multiple-curve HJM model of interbank risk. Math. Financ. Econ. 6(3), 155-90 (2012)CrossRef MathSciNet MATH
  11.Diamond, D., Dybvig, P.: Bank runs, deposit insurance and liquidity. J. Polit. Econ. 91, 401-19 (1983)CrossRef
  12.Ericsson, J., Renault, O.: Liquidity and credit risk. J. Financ. 61, 2219-250 (2006)CrossRef
  13.Goldstein, I., Pauzner, A.: Demand-deposit contracts and the probability of bank runs. J. Financ. 60, 1293-327 (2005)CrossRef
  14.He, Z., Xiong, W.: Rollover risk and credit risk. J. Financ. 67, 391-29 (2012)CrossRef
  15.He, Z., Xiong, W.: Dynamic debt runs. Rev. Financ. Stud. 25(6), 1799-843 (2012)CrossRef MathSciNet
  16.Hilberink, B., Rogers, L.C.G.: Optimal capital structure and endogenous default. Financ. Stoch. 6, 237-63 (2002)CrossRef MathSciNet MATH
  17.Krylov, N.V.: Controlled Diffusion Processes. Springer, Berlin (2008). 2nd printing edition
  18.Leland, H.E.: Corporate debt value, bond covenants, and optimal capital structure. J. Financ. 49, 1213-252 (1994)CrossRef
  19.Leland, H.E.: Agency costs, risk management, and capital structure. J. Financ. 53, 1213-243 (1998)CrossRef
  20.Leland, H.E., Toft, K.: Optimal capital structure, endogenous bankruptcy, and the term structure of credit spreads. J. Financ. 51, 987-019 (1996)CrossRef
  21.Liang, G.: Stochastic control representations for penalized backward stochastic differential equations. arXiv:-302.-480 (2013, Preprint)
  22.Liang, G., Jiang, L.: A modified structural model for credit risk. IMA J. Manag. Math. 23, 147-70 (2012)CrossRef MathSciNet MATH
  23.Liang, G., Lütkebohmert, E., Xiao, Y.: A multi-period bank run model for liquidity risk. Rev. Financ. 18(2), 803-42 (2014)CrossRef
  24.Liang, G., Lütkebohmert, E., Wei, W.: A continuous time structural model for insolvency, recovery, and rollover risks. http://?ssrn.?com/?abstract=-147466 (2012, Preprint)
  25.Longstaff, F., Schwartz, E.: A simple approach to valuing risky fixed and floating rate debt. J. Financ. 50, 789-19 (1995)CrossRef
  26.Merton, R.C.: On the pricing of corporate debt: the risk structure of interest rates. J. Financ. 29, 449-70 (1974)
  27.Morris, S., Shin, H.S.: Illiquidity component of credit risk. www.?banqueducanada.?ca/?wp-content/?uploads/-010/-9/?Illiquidity-Component (2010, Preprint)
  28.Morris, S., Shin, H.S.: Global games: theory and applications. In: Dewatripont, M., Hansen, L., Turnovsky, S. (eds.) Advances in Economics and Econometrics (Proceedings of the Eighth World Congress of the Econometric Society), pp. 56-154. Cambridge University Press, Cambridge (2003)
  
• 作者单位：Gechun Liang (1)
  Eva Lütkebohmert (2)
  Wei Wei (3)
  
  1. Department of Mathematics, King’s College London, Strand, London, WC2R 2LS, UK
  2. Department of Quantitative Finance, University of Freiburg, Platz der Alten Synagoge, 79098, Freiburg, Germany
  3. Mathematical Institute, University of Oxford, Oxford, OX2 6GG, UK
  
• 刊物类别：Mathematics and Statistics
• 刊物主题：Mathematics
  Quantitative Finance
  Finance and Banking
  Financial Economics
  Game Theory and Mathematical Methods
  Applications of Mathematics
  Statistics for Business, Economics, Mathematical Finance and Insurance
  
• 出版者：Springer Berlin / Heidelberg
• ISSN：1862-9660

文摘

We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm’s default probability depends on the liquidity risk associated with its financing structure. We assume the firm finances its risky assets by mainly issuing short- and long-term debt. Short-term debt can have either a discrete or a more realistic staggered tenor structure. At rollover dates of short-term debt, creditors face a dynamic coordination problem. We show that a unique threshold strategy (i.e., a debt run barrier) exists for short-term creditors to decide when to withdraw their funding, and this strategy is closely related to the solution of a non-standard optimal stopping time problem with control constraints. We decompose the total credit risk into an insolvency component and an illiquidity component based on such an endogenous debt run barrier together with an exogenous insolvency barrier. Keywords Structural credit risk model Debt run Liquidity risk First passage time Optimal stopping time