Corporate bond default risk
Subtitle: a 150-year perspective
By: Kay Giesecke, Francis A. Longstaff, Stephen Schaefer, Ilya Strebulaev
Contributors: National Bureau of Economic Research
Series: NBER working paper series -- working paper 15848; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 15848.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] :
Description: "We study corporate bond default rates using an extensive new data set spanning the 1866-2008 period.  We find that the corporate bond market has repeatedly suffered clustered default events much worse than those experienced during the Great Depression.  For example, during the railroad crisis of 1873-1875, total defaults amounted to 36 percent of the par value of the entire corporate bond market.  We examine whether corporate default rates are best forecast by structural, reduced-form, or macroeconomic credit models and find that variables suggested by structural models outperform the others.  Default events are only weakly correlated with business downturns.  We find that over the long term, credit spreads are roughly twice as large as default losses, resulting in an average credit risk premium of about 80 basis points.  We also find that credit spreads do not adjust in response to realized default rates"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 4/1/2010.

Includes bibliographical references.

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