Corporate bond pricing and different sources of asset return volatility
By: George Chacko, Peter Hecht and Jens Hilscher
Contributors: Hecht, Peter; Hilscher, Jens; Harvard Business School. Division of Research
Series: Working paper / Division of Research, Harvard Business School -- 03-046; Working paper (Harvard Business School. Division of Research) -- 03-046
Publisher: Division of Research, Harvard Business School
Published: 2003
Place of publication: Boston]
Language: eng
Number of pages: 14
Description: This paper presents a pricing model for defaultable bonds. Default is defined by a cash flow, not value, covenant. The cash flow (total distributions) yield is stochastic. We find that different sources of volatility, cash flow versus discount rate news, affect prices asymmetrically. Controlling for total asset return volatility, cash flow volatility is still important for bond pricing.
Notes: "Draft date: September 23, 2002."

Includes bibliographical references.