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SUMMARY:Disclosures\, Rollover Risk\, and Debt Runs
DTSTART:20160301T120000
DTEND:20160301T130000
DTSTAMP:20260610T054612Z
UID:79046d79db41109f44f64cd17097a2ffca5c76c9897dd5e9133dc32d
CATEGORIES:Conferences - Seminars
DESCRIPTION:Sylvain CARRE (PhD Student\, SFI@EPFL)\nFinancial institutions
  issuing short-term debt collateralized by long-term assets are exposed to
  rollover risk: creditors may decide to run\, forcing an inefficient liqui
 dation of the assets. This paper investigates the impact of asset opacity 
 and disclosure policy on short-term spreads dynamics\, run probability and
  efficiency. When the initial quality of collateral is high\, opacity redu
 ces spreads and run likelihood: debt is money-like. This\, however\, only 
 holds in the short run. At longer horizons\, the lack of information raise
 s concerns about the actual collateral value. Precisely because of opacity
 \, the bank has difficulties to credibly address these concerns and runs b
 ecome very likely. These runs are particularly inefficient as they often l
 ead to liquidate good assets. All these effects are amplified when disclos
 ure is voluntary rather than mandatory\, i.e. when the bank has superior i
 nformation and does not reveal bad news: the short-term protection is stro
 nger but runs occur more often at longer horizons. The model concludes tha
 t opacity (i) only reduces run probability when the run probability under 
 full information is low already\, (ii) always decreases efficiency\, (iii)
  is more inefficient when combined with voluntary disclosure. Another outp
 ut of the model is to show how non-panic debt runs can occur suddenly\, i.
 e. without news disclosure and as short-term spreads are very low. Contrar
 y to panic runs\, the trigger time of these runs is a function of the fund
 amentals.
LOCATION:UNIL\, Extranef\, room 126 https://planete.unil.ch/plan/?local=EX
 T-126
STATUS:CONFIRMED
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