Capital immobility and rollover risk in debt marketsopen access
- Authors
- Doh, Hyun Soo
- Issue Date
- Mar-2023
- Publisher
- 한국파생상품학회
- Keywords
- Contagion; Intervention policy; Market segmentation; Rollover risk
- Citation
- Journal of Derivatives and Quantitative Studies, v.31, no.1, pp 29 - 54
- Pages
- 26
- Indexed
- SCOPUS
KCI
- Journal Title
- Journal of Derivatives and Quantitative Studies
- Volume
- 31
- Number
- 1
- Start Page
- 29
- End Page
- 54
- URI
- https://scholarworks.bwise.kr/erica/handle/2021.sw.erica/113231
- DOI
- 10.1108/JDQS-09-2022-0021
- ISSN
- 1229-988X
2713-6647
- Abstract
- This paper aims to develop a credit-risk model in which firms face rollover risk, and the markets for defaulted assets are segmented due to entry costs. The paper shows that reducing the entry costs in this economy may decrease the total surplus of the economy. This outcome can arise because when market barriers are lifted, the gap between the liquidation prices across the markets will shrink, but then the market that would experience a price drop may face more bankruptcies because the rollover risk will increase in that market. The paper describes under which condition such an intervention policy improves or hurts the total surplus. © 2022, Hyun Soo Doh.
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