shocks to aggregate uncertainty, I introduce a small, time-varying risk of economic disaster in a standard real business … risk of disaster does not affect the path of macroeconomic aggregates - a "separation theorem" between macroeconomic … variation in risk premia over time, are observationally equivalent to preference shocks. An increase in the perceived …

a simple extension of the long-run risk model …

, economic uncertainty, and risk premia influence firms' financing and default policies. Countercyclical fluctuations in risk …. These comovements generate large credit risk premia for investment grade firms, which helps address the "credit spread …

This paper develops an overlapping generations model of optimal rebalancing where agents differ in age and risk … directions, an aggregate risk tolerance effect that depends on the distribution of wealth, and an intertemporal hedging effect …. After a negative macroeconomic shock, relatively risk tolerant investors sell risky assets while more risk averse investors …

shock captures systematic risk, and that exposure to this shock helps price the cross section of stock returns including …

aggregate risk premia. Building on the idea that corporate debt, while safe in normal times, is exposed to the risk of economic … depression, this paper embeds a trade-off theory of capital structure into a real business cycle model with a small, time …-varying risk of large economic disaster. This simple feature generates large, volatile and countercyclical credit spreads as well …

This paper studies the aggregate implications of imperfect risk-sharing implied by a class of New Keynesian models with … idiosyncratic income risk and incomplete financial markets. The models in this class can be equivalently represented as an economy … representative-agent economy to perform counterfactuals. We find that deviations from perfect risk-sharing were an important …