Abstract

http://ssrn.com/abstract=900679
 
 

Citations



 


 



Is Default Event Risk Priced in Corporate Bonds?


Joost Driessen


Tilburg University - Department of Finance; CentER Tilburg University

2005

The Review of Financial Studies, Vol. 18, Issue 1, pp. 165-195, 2005

Abstract:     
This article provides an empirical decomposition of the default, liquidity, and tax factors that determine expected corporate bond returns. In particular, the risk premium associated with a default event is estimated. The intensity-based model is estimated using bond price data for 104 US firms and historical default rates. Significant risk premia on common intensity factors and important tax and liquidity effects are found. These components go a long way towards explaining the level of expected corporate bond returns. Adding a positive default event risk premium helps to explain the remaining error, although this premium cannot be estimated with high statistical precision.

Accepted Paper Series


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Date posted: February 29, 2008  

Suggested Citation

Driessen, Joost, Is Default Event Risk Priced in Corporate Bonds? ( 2005). The Review of Financial Studies, Vol. 18, Issue 1, pp. 165-195, 2005. Available at SSRN: http://ssrn.com/abstract=900679

Contact Information

Joost Driessen (Contact Author)
Tilburg University - Department of Finance ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
CentER Tilburg University ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
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