We find strong evidence of a funding risk premium in the cross-section of asset returns. Our estimate for the price of funding risk is robust across Treasury bonds, corporate bonds, equities, and hedge funds. Funding shocks pose a risk to investors because they exacerbate the illiquidity and...

Expected returns vary when investors face time-varying investment opportunities. In theory, structural long-run risk models (Bansal and Yaron, 2004) and no-arbitrage affine models (Duffie, Pan, and Singleton, 2000) emphasize sources of risk that are not observable to the econometrician. We show...