Time Varying Risk Premia in Corporate Bond Markets
Author | : Redouane Elkamhi |
Publisher | : |
Total Pages | : 50 |
Release | : 2008 |
ISBN-10 | : OCLC:1290303816 |
ISBN-13 | : |
Rating | : 4/5 (16 Downloads) |
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.