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http://hdl.handle.net/2451/26774
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| Title: | Factors Affecting the Valuation of Corporate Bonds |
| Authors: | Elton, Edwin J.
Gruber, Martin J.
Agrawal, Deepak
Mann, Christopher |
| Issue Date: | 26-Oct-2000 |
| Series/Report no.: | S-CDM-01-09 |
| Abstract: | The valuation of corporate debt is an important issue in asset pricing.
While there has been an enormous amount of theoretical modeling of
corporate bond prices, there has been relatively little empirical
testing of these models. Recently there has been extensive development
of rating based reduced form models. These models take as a premise that
bonds when grouped by ratings are homogeneous with respect to risk. For
each risk group the models require estimates of several characteristics
such as the spot yield curve, the default probabilities and the recovery
rate. These estimates are then used to compute the theoretical price for
each bond in the group. The purpose of this article is to examine the
pricing of corporate bonds when bonds are grouped by ratings, and to
investigate the ability of characteristics, in addition to bond ratings,
to improve the performance of rating based models. Most of our testing
will be conducted in models which are in the spirit of the theory
developed by Duffie and Singleton (1997) and Duffie (1999). |
| URI: | http://hdl.handle.net/2451/26774 |
| Appears in Collections: | Credit & Debt Markets
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