Time Varying Default Risk Premia in Corporate Bond Markets
We develop a methodology to study the linkages between equity and corporate bond risk premia and apply it to a large panel of corporate bond transaction data. We find that a significant part of the time variation in bond default risk premia can be explained by equity implied bond risk premium estimates. We compute these estimates using a recent structural credit risk model. In addition, we show by means of linear regressions that augmenting the set of variables predicted by typical structural models with equity-implied bond default risk premia significantly increases explanatory power. This in turn suggests that time varying risk premia are a desirable feature for future structural models.
corporate bonds credit risk structural model volatility default risk premia idiosyncratic risk
Redouane Elkamhi Jan Ericsson
Desautels Faculty of Management,McGill University
国际会议
大连
英文
1-49
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）