Motivated by growing concerns about the risks and instability of China's financial system, this article reviews several commonly perceived financial risks and discusses their roots in China's politico-economic institutions. We emphasize the need to evaluate these risks within China's unique...

Our model shows that deterioration of debt market liquidity not only leads to an increase in liquidity premium of corporate bonds but also credit risk. The latter effect originates from firms' debt rollover. When liquidity deterioration causes a firm to suffer losses in rolling over its maturing...

This paper analyzes the joint responses of commodity futures prices and traders' futures positions to changes in the VIX before and after the recent financial crisis. We find that while financial traders accommodate the needs of commercial hedgers in normal times, in times of distress, financial...

This paper models a firm's rollover risk generated by conflict of interest between debt and equity holders. When the firm faces losses in rolling over its maturing debt, its equity holders are willing to absorb the losses only if the option value of keeping the firm alive justifies the cost of...

We study the joint responses of commodity futures prices and positions of various trader groups to changes of the CBOE Volatility Index (VIX) before and after the recent financial crisis. Financial traders reduced their net long positions during the crisis in response to market distress, while...

Motivated by growing concerns about the risks and instability of China's financial system, this article reviews several commonly perceived financial risks and discusses their roots in China's politico-economic institutions. We emphasize the need to evaluate these risks within China's unique...