The chapters in this dissertation study the incidence of risk, risk taking, and the role of markets used to trade risk, with a focus on interest-rate risk. In Chapter 1, I ask why bank-dependent firms bear interest-rate risk. I argue that the short-term nature of banks’ own financing drives the extent to which bank-dependent firms bear interest-rate risk. In Chapter 2, I examine the implications of life insurers’ risk taking for theories of why financial institutions take risk. In Chapter 3, I argue that reference rates mitigate contractual incompleteness and facilitate risk sharing.
