The credit spread puzzle
WebAug 26, 2008 · In Section 1, we report historical data on the level and time variation of credit spreads, leverage, and default probabilities. In Section 2, we use the Merton model as a … http://www.feldhutter.com/CreditSpreadPuzzleFINAL.pdf
The credit spread puzzle
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WebSince asset volatility morphology can reflect the change of investors’ expectation on the default probability of asset, the argument mentioned in the credit spread puzzle that the fundamentals related to bond default probability cannot explain credit spreads needs to be reexamined. Keywords: Bond market credit spread puzzle Merton model WebAug 26, 2008 · the “credit spread puzzle.” Note that this credit spread puzzle is reminiscent of the so-called equity pre-mium puzzle in that the historical returns on equity also appear to be too high for the risks involved. Given that corporate bonds and equities are contingent claims to the same firm value, they necessarily share many of the same system-
WebSep 29, 2014 · Many papers find that standard structural models predict corporate bond spreads that are too low compared to actual spreads, givin rise to the so-called credit spread puzzle. We show that the puzzle derives in large part from strong biases and low statistical power in commonly adopted approaches to testing the models. The biases are … WebAug 1, 2024 · There is a large body of literature claiming evidence in favor of a credit spread puzzle in which spreads between yields on investment-grade (IG) corporate bonds and …
WebNov 1, 2005 · This paper aims to empirically test the explanatory power of the factors implied by the theory on credit spreads, and presents the puzzle that such factors explain little of these spreads. Thereafter, we attempt to G12 G19 Keywords Asset pricing Credit spread Illiquidity Risk aversion Structural model Cited by (0) View full text WebMuch academic research shows that the spreads at which corporate bonds trade above a similar default-free asset are too large compared with what is predicted by a standard structural model. This finding has given rise to the so-called Credit Spread Puzzle.
WebThe credit spread puzzle has come to refer to the inability of structural models, when calibrated to default probabilities, loss rates and Sharpe ratios, to predict spread levels across rating categories consistent with historical market spreads. Huang and Huang (2003, HH) perform this calibration
WebThe Global Credit Spread Puzzle Jing-Zhi Huangy Penn State Yoshio Nozawaz HKUST Zhan Shix Tsinghua University December 19, 2024 Abstract Using security-level credit spread … peterborough employment opportunitiesWebJun 30, 2015 · Much academic research shows that the spreads at which corporate bonds trade above a similar default-free asset are too large compared with what is predicted by … star ferry to kowloonWebCredit Spread Puzzle and the Equity Premium Puzzle, Review of Financial Studies 37. 22, 3367{3407. Collin-Dufresne P., Goldstein R. S., Martin J. S. (2001), The Determinants of … peterborough emergency vetWebThe Myth of the Credit Spread Puzzle cross-section of default rates at different maturities and ratings. We use the Black and Cox (1976) model and what ties default probabilities … star ferry mackinac scheduleWebFeb 27, 2024 · ABSTRACT Most extant structural credit risk models underestimate credit spreads—a shortcoming known as the credit spread puzzle. We consider a model with … star fiber cleaning clothsWebNov 1, 2005 · The credit-spread puzzle. According to theoretical models of credit risk, the determinants of credit spreads are the differences in creditworthiness between … starfiber clothWebApr 29, 2012 · The wide gap between spreads and expected default losses is what we call the credit spread puzzle. In this article we argue that the answer to the credit spread puzzle might lie in the difficulty of diversifying default risk. starfiber microfiber kitchen scrubbies