TY - JOUR AU - Brunnermeier,Markus K. AU - Yogo,Motohiro TI - A Note on Liquidity Risk Management JF - National Bureau of Economic Research Working Paper Series VL - No. 14727 PY - 2009 Y2 - February 2009 DO - 10.3386/w14727 UR - http://www.nber.org/papers/w14727 L1 - http://www.nber.org/papers/w14727.pdf N1 - Author contact info: Markus K. Brunnermeier Princeton University Department of Economics Bendheim Center for Finance Princeton, NJ 08540 Tel: 609/258-4050 Fax: 609/258-0771 E-Mail: markus@princeton.edu Motohiro Yogo Department of Economics Princeton University Julis Romo Rabinowitz Building Princeton, NJ 08544 E-Mail: myogo@princeton.edu AB - 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. ER -