Before revision: We propose a unified structural credit risk model incorporating insolvency, recovery and rollover risks. The firm finances itself mainly by issuing short- and long-term debt.
After revision: We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume the firm finances its risky assets by issuing short- and long-term debt.