Rolling over Corporate Bonds: How Market Liquidity affects Credit Risk

2014 ◽  
Author(s):  
Florian Nagler
Keyword(s):  
Credit Risk ◽  
Corporate Bonds ◽  
Market Liquidity

scholarly journals The Determinants of the Nondefaultable Spreads of Corporate Bonds: Evidence from China

2021 ◽  
Vol 2021 ◽  
pp. 1-21
Author(s):  
Baochen Yang ◽  
Zijian Wu ◽  
Yunpeng Su
Keyword(s):  
Financial Crisis ◽  
Credit Risk ◽  
Corporate Bonds ◽  
Market Liquidity ◽  
Price Difference ◽  
Interbank Market ◽  
Exchange Market ◽  
Bond Liquidity ◽  
Individual Bond

This study investigates the factors impacting the price difference between the interbank market and the exchange market for the same bond using a large transaction dataset from July 2006 to June 2016 in China. We find that market liquidity and macrofactors mainly affect the price difference between the two markets for the same bond. And individual bond liquidity explains only a small part of the price difference. We also find that the interaction between liquidity and credit risk is an important factor affecting the price difference, and the effect is greater during financial crisis.

A portfolio optimization model for corporate bonds subject to credit risk

2004 ◽  
Vol 6 (2) ◽  
pp. 31-48 ◽  
Author(s):  
Nagisa Akutsu ◽  
Masaaki Kijima ◽  
Katsuya Komoribayashi
Keyword(s):  
Credit Risk ◽  
Portfolio Optimization ◽  
Optimization Model ◽  
Corporate Bonds ◽  
Portfolio Optimization Model

scholarly journals ENTERPRISE FINANCING BY MEANS OF CORPORATE BONDS TOOLKIT

2017 ◽  
pp. 57-67
Author(s):  
Mykola Stetsko
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Risk Premium ◽  
Corporate Bonds ◽  
Synthesis Method ◽  
Developed Countries ◽  
Point Of View ◽  
Market Liquidity ◽  
Corporate Bond ◽  
Systematic Risks

Introduction. In contrast to the markets of developed countries, forming characteristic risk premium investment bonds in emerging markets, is that the greatest effect on the risk premium on bonds in countries such factor provides market liquidity in general and specific securities in particular. The second most significant factor influencing the risk premium is the risk of changing interest rates. The risk of default of issuers in such countries is also quite high, but the component of creditworthiness is less significant factor in the combination of systematic risks. Due to low sovereign ratings of Ukraine, the credit ratings of bonds of all domestic issuers have a speculative level. Owing to this fact, all of them can be classified as highly risky and, accordingly, highly profitable (HighYield Bonds). Purpose. The aim of the article is to reduce deficits in the scientific and methodological provision of the use of corporate bonds instruments on the basis of determining the determinants of the premium for the risk of investing in them. Method (methodology). To achieve the goal and solve the problems, the following methods have been used: method of analysis and synthesis, method of comparison and generalization; method of empirical research and factor analysis; method of system approach and strategy. Results. The research of the determinants of the risk premium is important, first of all, from the point of view of substantiating the technologies of reducing the cost of enterprises to capital. The key causes of underdevelopment of the domestic corporate bond market have been determined. We have identified factors that influence the spread of profitability and the value of bonds. They are the risk of default of the issuer and the potential of the enterprise development (credit component); base interest rate and long-term interest rates on the financial market (interest rate component); liquidity of the capital market (component of liquidity); the level of inflation and the development of economic conditions; information risks. It has been determined that in order to reduce the risk of investments in corporate bonds, it is necessary to implement at the regulatory level a set of measures to reduce overhead costs and increase the reliability of investments. The introduction of a safety covenant system can be defrined as one of such measures.

The Distress Anomaly is Deeper than you Think: Evidence from Stocks and Bonds

2021 ◽  
Author(s):  
Doron Avramov ◽  
Tarun Chordia ◽  
Gergana Jostova ◽  
Alexander Philipov
Keyword(s):  
Credit Risk ◽  
Financial Distress ◽  
Corporate Bonds ◽  
Time Varying ◽  
External Financing ◽  
Earnings Expectations ◽  
Limits To Arbitrage

Abstract The distress anomaly reflects the abnormally low returns of high credit risk stocks during financial distress. Evidence from stocks and corporate bonds reinforces the anomaly and challenges rationales based on shareholders’ ability to extract value from bondholders, time-varying betas, lottery-type preferences, biased earnings expectations, and limits-to-arbitrage. Moreover, mispricing of distressed stocks and bonds is associated with excess investment and excess external financing. Potential real distortions are materially understated when assessed based only on equity mispricing. We emphasize the important role of corporate bonds in dissecting the distress anomaly, and show that the anomaly is an unresolved puzzle.

Measuring Credit Risk of Individual Corporate Bonds in US Energy Sector

2016 ◽  
Vol 23 (3) ◽  
pp. 229-262 ◽  
Author(s):  
Takeaki Kariya ◽  
Yoko Tanokura ◽  
Hideyuki Takada ◽  
Yoshiro Yamamura
Keyword(s):  
Credit Risk ◽  
Corporate Bonds ◽  
Energy Sector

Liquidity Risk Premia in Corporate Bond Markets

2012 ◽  
Vol 02 (02) ◽  
pp. 1250006 ◽  
Author(s):  
Frank de Jong ◽  
Joost Driessen
Keyword(s):  
Risk Premium ◽  
Corporate Bonds ◽  
Liquidity Risk ◽  
Risk Premia ◽  
Market Liquidity ◽  
Corporate Bond ◽  
Expected Returns ◽  
Bond Returns ◽  
Treasury Bond ◽  
Investment Grade

This paper explores the role of liquidity risk in the pricing of corporate bonds. We show that corporate bond returns have significant exposures to fluctuations in treasury bond liquidity and equity market liquidity. Further, this liquidity risk is a priced factor for the expected returns on corporate bonds, and the associated liquidity risk premia help to explain the credit spread puzzle. In terms of expected returns, the total estimated liquidity risk premium is around 0.6% per annum for US long-maturity investment grade bonds. For speculative grade bonds, which have higher exposures to the liquidity factors, the liquidity risk premium is around 1.5% per annum. We find very similar evidence for the liquidity risk exposure of corporate bonds for a sample of European corporate bond prices.

The Effect of Market Liquidity Risk on The Credit Ratings of Corporate Bonds

2019 ◽  
Vol 37 (3) ◽  
pp. 183-205
Author(s):  
Hyung Tae An ◽  
Seong Mi Bae ◽  
Mun Kee Cho
Keyword(s):  
Credit Ratings ◽  
Corporate Bonds ◽  
Liquidity Risk ◽  
Market Liquidity
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