The role that banks play in screening and monitoring their borrowers is well understood. However, these bank activities are costly and unobservable, thus difficult to contract upon. This introduces the possibility of shirking and leads to the question – who monitors the monitor? Financial...

This paper develops a theory of how risk is assessed and priced through the business cycle by developing an intuitive model in which there is uncertainty about whether outcomes depend on the risk-management skills of banks or are just based on luck, in the spirit of Piketty's (1995) model of...

This paper develops a theory of how risk is assessed and priced through the business cycle by developing an intuitive model in which there is uncertainty about whether outcomes depend on the risk-management skills of banks or are just based on luck, in the spirit of Piketty's (1995) model of...