Hui Chen

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Staff Working Papers

Systematic Risk, Debt Maturity and the Term Structure of Credit Spreads

Staff Working Paper 2012-27 Hui Chen, Yu Xu, Jun Yang
We build a dynamic capital structure model to study the link between systematic risk exposure and debt maturity, as well as their joint impact on the term structure of credit spreads. Our model allows for time variation and lumpiness in the maturity structure. Relative to short-term debt, long-term debt is less prone to rollover risks, but its illiquidity raises the costs of financing.
Content Type(s): Staff Research, Staff Working Papers Topic(s): Asset pricing, Debt management JEL Code(s): G, G3, G32, G33

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