A Note on Liquidity Risk Management

Markus K. Brunnermeier () and Motohiro Yogo ()

No 14727, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: When a firm is unable to roll over its debt, it may have to seek more expensive sources of financing or even liquidate its assets. This paper provides a normative analysis of minimizing such rollover risk, through the optimal dynamic choice of the maturity structure of debt. The objective of a firm with long-term assets is to maximize the effective maturity of its liabilities across several refinancing cycles, rather than to maximize the maturity of the current bonds outstanding. An advantage of short-term financing is that a firm, while in good financial health, can readjust its maturity structure more quickly in response to changes in its asset value.

JEL-codes: G32 G33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-rmg
Date: 2009-02
Note: AP CF
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w14727.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

Related works:
Journal Article: A Note on Liquidity Risk Management (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:14727

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w14727
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().