compensation for jump-to-default risk. However, these models preclude a "contagion-risk'' channel, where the aggregate corporate … subject to contagion-risk. We show that when investors have fragile beliefs (Hansen and Sargent (2009)), contagion premia may … in response to large credit events. Model calibrations suggest that while contagion risk premia may be sizable, jump …

"We present a dynamic general equilibrium model with agency costs where: i) firms are heterogeneous in the risk of … corporate credit risk relative to the US, and when european firms value more than US firms the flexibility and information …

reserves are positively related to credit risk, resulting in a positive correlation between cash and spreads. In contrast …, spreads are negatively related to the "exogenous'' component of cash holdings that is independent of credit risk factors …, suggesting that precautionary savings are central to understanding the effects of cash on credit risk"--National Bureau of …