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Liquidity and Risk Management

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  • Holmstrom, Bengt
  • Tirole, Jean

Abstract

Firms and financial institutions are best viewed as ongoing entities, whose project completion may require renewed injections of liquidity. This paper proposes a contract-theoretic framework integrating three dimensions of corporate financing and prudential regulation: (a) liquidity management, (b) risk management, and (c) capital structure. It concludes with a preliminary assessment of recent regulatory approaches to the treatment of market risk.

Suggested Citation

  • Holmstrom, Bengt & Tirole, Jean, 2000. "Liquidity and Risk Management," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 295-319, August.
  • Handle: RePEc:mcb:jmoncb:v:32:y:2000:i:3:p:295-319
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