Felipe Varas
Institution
University of Texas at Dallas
PhD Year
2013
felipe.varas@utdallas.edu
FTG Membership
Member
Website
https://felipevaras.com
Featured Work
Financial Flexibility under Non-Exclusive Lending
Jul 31, 2026
This paper studies optimal financial flexibility in debt issuance. A borrower raises funds for an initial investment and may need financing after observing a private liquidity shock. Under non-exclusive lending, new lenders price only their claims, so additional borrowing dilutes existing debt and leads to excessive leverage. The optimal simple debt contract is an endogenous debt limit. It captures the intertemporal commitment--flexibility tradeoff: more borrowing...
