The credit spread puzzle
http://www.feldhutter.com/CreditSpreadPuzzleFINAL.pdf 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 …
The credit spread puzzle
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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. WebFeb 1, 2003 · Amato & Remolona (2003) first reported the phenomenon of the credit spread puzzle; i.e., they found that the difference between the model-based credit risk estimates …
Webtwo puzzles about corporate debt. The first puzzle is the “credit spread puzzle”: yield spreads between investment grade corporate bonds and treasuries are high and volatile relative to the ob-served default probabilities and recovery rates. The second is the “under-leverage puzzle”: firms WebMar 14, 2008 · The credit spread puzzle In order to analyze risk conditions in the corporate bond market, it is not enough to look only at the yields, because they are susceptible to …
WebApr 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.
WebDec 8, 2003 · The credit spread puzzle. BIS Quarterly Review December 2003 . 08 December 2003. by Jeffery Amato and Eli M Remolona. PDF full text. (70kb) 13 pages.
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 … how is tesla doing in chinaWebMar 18, 2011 · The credit spread puzzle refers to the observation that structural models such as the one proposed by Merton (1974) have failed to explain the high excess returns received by corporate bondholders historically. Key assumptions of the structural models from which the puzzle arose were time-invariant default probabilities and recovery rates. how is tesla doing todayWebAbstract. When analyzing credit spreads embedded in fixed-income investments, prior structural models have been shown to misrepresent these spreads compared with the … how is tesla stock doingWebCredit 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 … how is tesla doing in the stock marketWebAug 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 … how is tesla doing nowWebAug 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 … how is tesla stock so highWebSince 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 how is testbook quora