Measuring Default Risk Premia from Default Swap Rates and EDFs
Author | : Antje Berndt |
Publisher | : |
Total Pages | : 62 |
Release | : 2005 |
ISBN-10 | : IND:30000100671647 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Measuring Default Risk Premia from Default Swap Rates and EDFs written by Antje Berndt and published by . This book was released on 2005 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper estimates recent default risk premia for U.S. corporate debt, based on a close relationship between default probabilities, as estimated by Moody's KMV EDFs, and default swap (CDS) market rates. The default-swap data, obtained through CIBC from 22 banks and specialty dealers, allow us to establish a strong link between actual and risk-neutral default probabilities for the 69 firms in the three sectors that we analyze: broadcasting and entertainment, healthcare, and oil and gas. We find dramatic variation over time in risk premia, from peaks in the third quarter of 2002, dropping by roughly 50% to late 2003.