We focus on structural models in corporate finance with roll-over debt structures in the vein of Leland (1994) and Leland and Toft (1996). We show that these models incorrectly assume that the optimal default is defined by the first time such that the firm's assets reaches a sufficiently low...

We study the decision of when to invest in an indivisible project whose value is perfectly observable but driven by a parameter that is unknown to the decision maker ex ante. This problem is equivalent to an optimal stopping problem for a bivariate Markov process. Using filtering and martingale...

We develop a dynamic model of investment, cash holdings, financing, and risk management policies in which firms face financing frictions and are subject to permanent and temporary cash ow shocks. In this model, target cash holdings depend on the long-term prospects of the firm, implying that the...

We develop a dynamic model of investment, cash holdings, financing, and risk management policies in which firms face financing frictions and are subject to permanent and temporary cash ow shocks. In this model, target cash holdings depend on the long-term prospects of the firm, implying that the...

We develop a bi-dimensional dynamic model of corporate cash management in which shareholders learn about a firm's profitability and weigh the costs and benefits of holding cash. We explicitly characterize the optimal payout policy. We explain how the evolution of the strength of shareholders'...