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Corporate Bond Risk Premia
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Book Synopsis Corporate Bond Risk Premia by : Christian Speck
Download or read book Corporate Bond Risk Premia written by Christian Speck and published by . This book was released on 2013 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the holding period risk premia of U.S. corporate and Treasury bonds. Using excess return regressions, two priced risk factors are derived from yield and macroeconomic data: a priced term risk factor and a priced credit risk factor explain half of the variation in one-year corporate and Treasury excess returns. The information of the term risk factor is not represented by major yield characteristics but is a hidden risk factor whereas the credit risk factor is not hidden. The term risk premium is earned primarily for exposure to inflation and the yield level and the credit risk premium is earned for an exposure to real growth and the credit spread level. The regression results are usefull for the specification of the market prices of risk in affine credit term structure models: The two-factor representation of the risk premium suggests a rank restriction on the market prices of risk and an additional pricing factor to capture the hidden property of term risk.
Book Synopsis Time Varying Risk Premia in Corporate Bond Markets by : Redouane Elkamhi
Download or read book Time Varying Risk Premia in Corporate Bond Markets written by Redouane Elkamhi and published by . This book was released on 2008 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the link between corporate bond risk premia and equity returns in a large panel of corporate bond transaction data. In contrast to previous work, we find that a significant part of the time variation in bond risk premia can be explained by equity implied bond risk premium estimates. We also document a large time variation in the expected loss component of bond spreads. This component is related to total asset volatility, whereas the risk premium is related to systematic volatility. 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.
Book Synopsis Liquidity Risk Premia in Corporate Bond Markets by : Frank De Jong
Download or read book Liquidity Risk Premia in Corporate Bond Markets written by Frank De Jong and published by . This book was released on 2009 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores the role of liquidity risk in the pricing of corporate bonds. We show that corporate bond returns have signifcant exposures to fluctuations in treasury bond liquidity and equity market liquidity. Further, this liquidity risk is a priced factor for the expected returns on corporate bonds, and the associated liquidity risk premia help to explain the credit spread puzzle. In terms of expected returns, the total estimated liquidity risk premium is around 0.6% per annum for US long-maturity investment grade bonds. For speculative grade bonds, which have higher exposures to the liquidity factors, the liquidity risk premium is around 1.5% per annum. We find very similar evidence for the liquidity risk exposure of corporate bonds for a sample of European corporate bond prices.
Book Synopsis What Drives Corporate Bond Risk Premia? Evidence from the CDS Market by : Antonio Diaz
Download or read book What Drives Corporate Bond Risk Premia? Evidence from the CDS Market written by Antonio Diaz and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This article studies the economic factors behind corporate default risk premia in Europe during the period 2006-2010. We employ information embedded in Credit Default Swap (CDS) contracts to quantify expected excess returns from the underlying bonds in market-wide default circumstances. We disentangle the compensation to investors for unexpected changes in the creditworthiness of the bond issuer from their remuneration for the risk that the bond's price will drop in the event of default. Our results show that the risk premia associated with systematic factors influencing default arrivals represent approximately 40% of total CDS spread (on median). These premia also exhibit a strong source of commonality; a single principal component explains approximately 88% of their joint variability. This factor significantly covaries with aggregate illiquidity and sovereign risk variables. Empirical evidence suggests a public-to-private risk transfer between sovereign credit spread and corporate risk premia. Finally, the compensation in the event of default is approximately 14 basis points of the total CDS spread, and a significant amount of jump-at-default risk may not be diversifiable.
Book Synopsis Investing in Corporate Bonds and Credit Risk by : F. Hagenstein
Download or read book Investing in Corporate Bonds and Credit Risk written by F. Hagenstein and published by Springer. This book was released on 2004-10-01 with total page 355 pages. Available in PDF, EPUB and Kindle. Book excerpt: Investing in Corporate Bonds and Credit Risk is a valuable tool for any corporate bond investor. All the most recent developments and strategies in investment in corporate bonds are analyzed included with qualitative and quantitative approaches. A complete and up-to-date investment process is developed through the book, using many examples taken from banking practice. The growing significance of derivative instruments and credit diversification to bond investors is also analyzed in detail.
Book Synopsis A Quantitative Analysis of Risk Premia in the Corporate Bond Market by : Sara Cecchetti
Download or read book A Quantitative Analysis of Risk Premia in the Corporate Bond Market written by Sara Cecchetti and published by . This book was released on 2017 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Corporate Bond Risk Premiums and Public Policies by : William D. Jackson
Download or read book Corporate Bond Risk Premiums and Public Policies written by William D. Jackson and published by . This book was released on 1985 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Common Risk Factors in the Cross-Section of Corporate Bond Returns by : Jennie Bai
Download or read book Common Risk Factors in the Cross-Section of Corporate Bond Returns written by Jennie Bai and published by . This book was released on 2018 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the cross-sectional determinants of corporate bond returns and find that downside risk is the strongest predictor of future bond returns. We also introduce common risk factors based on the prevalent risk characteristics of corporate bonds -- downside risk, credit risk, and liquidity risk -- and find that these novel bond factors have economically and statistically significant risk premia that cannot be explained by long-established stock and bond market factors. We show that the newly proposed risk factors outperform all other models considered in the literature in explaining the returns of the industry- and size/maturity-sorted portfolios of corporate bonds.
Book Synopsis Decomposition of Country-Specific Corporate Bond Spreads by : Niko Dötz
Download or read book Decomposition of Country-Specific Corporate Bond Spreads written by Niko Dötz and published by . This book was released on 2016 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a new approach, based on the Merton model, to decomposing corporate bond spreads into the expected loss, bond risk premium and liquidity premium components. The approach focuses on establishing the bond risk premium using the equity risk premium and the hedge ratio, which are estimated using a dividend discount model and a BEKK-GARCH model. The analysis focuses on non-financial European BBB-rated corporate bonds and distinguishes explicitly between German, French, Spanish and Italian firms. The results show that the bond risk premium is the largest component. While the expected loss component made the greatest contribution to the strong widening of the spreads around the turn of 2008/09, the spreads were then heavily dominated by the bond risk premium and investors received relatively low or, at times, no compensation for expected losses. The safe interest rate and the sovereign CDS premiums are key determinants of the expected loss component and the bond risk premium.
Book Synopsis Expected Bond Returns and the Credit Risk Premium by : Zvika Afik
Download or read book Expected Bond Returns and the Credit Risk Premium written by Zvika Afik and published by . This book was released on 2014 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: A bond's expected return (EBR) is the ex-ante internal rate of return of the bond's expected future cash flows, whereas a bond's yield to maturity (YTM) is the internal rate of return of its promised future cash flows. In this paper we estimate the EBR for a sample of bonds using rating transition matrices and recovery percentages for defaulted states. We apply the model to U.S. corporate bond data, using rating transition matrices and industry-specific recovery rates. We show that ratings largely explain bond maturity-dependent credit risk premia (CRP), defined as the difference between yield to maturity and expected return. This contrasts with the well-known inability of ratings to explain bond yields to maturity.
Book Synopsis Corporate Bonds by : Walter Braddock Hickman
Download or read book Corporate Bonds written by Walter Braddock Hickman and published by . This book was released on 1957 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Investments and Portfolio Performance by : Edwin J. Elton
Download or read book Investments and Portfolio Performance written by Edwin J. Elton and published by World Scientific. This book was released on 2011 with total page 417 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book contains the recent contributions of Edwin J. Elton and Martin J. Gruber to the field of investments. All of the articles in this book have been published in the leading finance and economic journals. Sixteen of the twenty articles have been published in the last ten years. This book supplements the earlier contributions of the editors published by MIT Press in 1999.
Book Synopsis Corporate Bond Risk Premiums and the Eurobond Market by : Norman J. Bartczak
Download or read book Corporate Bond Risk Premiums and the Eurobond Market written by Norman J. Bartczak and published by . This book was released on 1980 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Default Risk Premia and Asset Returns by : Antje Berndt
Download or read book Default Risk Premia and Asset Returns written by Antje Berndt and published by . This book was released on 2008 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: We identify a common default risk premia (DRP) factor in the risk-adjusted excess returns on pure default-contingent claims. Asset pricing tests using almost 50 corporate bond portfolios sorted on rating, maturity or industry suggest that the DRP factor is priced in the corporate bond market. For index put option portfolios sorted on maturity and moneyness, both average returns and DRP beta estimates become more negative with decreasing time to maturity. There is little to no evidence of the DRP factor being priced in equity markets. Most of the variation in DRP is explained by the portion DRP^{JtD} due to common jump-to-default risk premia. A theoretical framework where DRP^{JtD} is part of the pricing kernel supports our empirical findings.
Book Synopsis Managing Credit Risk in Corporate Bond Portfolios by : Srichander Ramaswamy
Download or read book Managing Credit Risk in Corporate Bond Portfolios written by Srichander Ramaswamy and published by John Wiley & Sons. This book was released on 2004-03-29 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: Expert guidance on managing credit risk in bond portfolios Managing Credit Risk in Corporate Bond Portfolios shows readers howto measure and manage the risks of a corporate bond portfolioagainst its benchmark. This comprehensive guide explores a widerange of topics surrounding credit risk and bond portfolios,including the similarities and differences between corporate andgovernment bond portfolios, yield curve risk, default and creditmigration risk, Monte Carlo simulation techniques, and portfolioselection methods. Srichander Ramaswamy, PhD (Basel, Switzerland), is Head ofInvestment Analysis at the Bank for International Settlements (BIS)in Basel, Switzerland, and Adjunct Professor of Banking andFinance, University of Lausanne.
Book Synopsis Risk Premium on Corporate Bonds by : Ruth Bendetovitch
Download or read book Risk Premium on Corporate Bonds written by Ruth Bendetovitch and published by . This book was released on 1900 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Credit Derivatives Pricing Models by : Philipp J. Schönbucher
Download or read book Credit Derivatives Pricing Models written by Philipp J. Schönbucher and published by John Wiley & Sons. This book was released on 2003-10-31 with total page 396 pages. Available in PDF, EPUB and Kindle. Book excerpt: The credit derivatives market is booming and, for the first time, expanding into the banking sector which previously has had very little exposure to quantitative modeling. This phenomenon has forced a large number of professionals to confront this issue for the first time. Credit Derivatives Pricing Models provides an extremely comprehensive overview of the most current areas in credit risk modeling as applied to the pricing of credit derivatives. As one of the first books to uniquely focus on pricing, this title is also an excellent complement to other books on the application of credit derivatives. Based on proven techniques that have been tested time and again, this comprehensive resource provides readers with the knowledge and guidance to effectively use credit derivatives pricing models. Filled with relevant examples that are applied to real-world pricing problems, Credit Derivatives Pricing Models paves a clear path for a better understanding of this complex issue. Dr. Philipp J. Schönbucher is a professor at the Swiss Federal Institute of Technology (ETH), Zurich, and has degrees in mathematics from Oxford University and a PhD in economics from Bonn University. He has taught various training courses organized by ICM and CIFT, and lectured at risk conferences for practitioners on credit derivatives pricing, credit risk modeling, and implementation.
