Defining, Estimating and Using Credit Term Structures. Part 2: Consistent Risk Measures
17 Pages Posted: 7 Jun 2005
Date Written: November 2004
In the second part of our series, we suggest new definitions of credit bond duration and convexity that remain consistent across all levels of credit quality including deeply distressed bonds and introduce additional risk measures that are consistent with the survival-based valuation framework. We then show how to use these risk measures for the construction of market neutral portfolios.
(see part 1 at: http://ssrn.com/abstract=736864 & part 3 at: http://ssrn.com/abstract=736884)
Keywords: Credit risk, credit bond, recovery risk, portfolio management, relative value, risk management
JEL Classification: G10, G11, G12, G13
Suggested Citation: Suggested Citation