We derive exact expressions for the risk premia for general distributions in a Lucas economy and show that the errors when using log-linear approximations can be economically significant when the shocks are nonnormal. Assuming growth rates are Normal Inverse Gaussian (NIG) and fitting the...

We analyze banks' pooling of corporate loans and propose Pareto-improving sharing rules that depend only on the relative sizes of the loans. Implementation of these sharing rules do not require any precise knowledge of default probabilities or default correlations

Based on a screening model, we hypothesize that borrower risk will be over- (under-)priced in recessions (booms), and the loan spreads' sensitivity to default risk as a function of economic growth will be inverse U-shaped. We test this prediction using a sample of 5,300 U.S. commercial loans...