  This paper analyzes the hypothesis that returns play a risk-compensating role
in the market for corporate revolving lines of credit. Specifically, we test
whether borrower risk and the expected return on these debt instruments are
positively related. Our main findings support this prediction, in contrast to
the only previous work that examined this problem two decades ago.
Nevertheless, we find evidence of mispricing regarding the risk of
deteriorating firms using their facilities more intensively and during the
subprime crisis.
