Secondary Market Liquidity and Primary Market Allocations in Corporate Bonds

2018 ◽  
Author(s):  
Thomas Flanagan ◽  
Simi Kedia ◽  
Xing (Alex) Zhou
Keyword(s):  
Corporate Bonds ◽  
Secondary Market ◽  
Market Liquidity

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.

A Comparative Analysis of Drivers of Secondary Market Liquidity in Financial Markets for Investment Analysis

2019 ◽  
pp. 340-366
Author(s):  
Hakki Karatas ◽  
Nildag Basak Ceylan ◽  
Ayhan Kapusuzoglu
Keyword(s):  
Comparative Analysis ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Negative Impact ◽  
Bond Market ◽  
Secondary Market ◽  
Market Liquidity ◽  
Investment Analysis ◽  
Secondary Bond ◽  
The Impact

The purpose of this chapter is to examine the drivers of secondary bond market and stock market liquidity for investment analysis after global financial crisis in Turkey. The literature in Turkey mainly focuses only on the volatility of return for driving liquidity in both bond and stock markets. However, it is argued that other types of volatilities including domestic and international volatilities have also a deteriorating impact on secondary market liquidity in Turkey. In this context, it is empirically tested whether the volatility and/or uncertainty that stem from the FED and ECB policies within the last 10 years had a negative impact on liquidity both in government bond and stock markets. Moreover, the impact of non-residents in bond and stock markets on secondary market liquidity is examined by including their holdings in stock and bond market.

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.

scholarly journals Secondary Market Liquidity and Primary Market Pricing of Corporate Bonds

2019 ◽  
Vol 12 (2) ◽  
pp. 86 ◽  
Author(s):  
Michael A. Goldstein ◽  
Edith S. Hotchkiss ◽  
David J. Pedersen
Keyword(s):  
Asset Prices ◽  
Cost Of Capital ◽  
Secondary Market ◽  
Market Liquidity ◽  
Corporate Bond ◽  
Yield Spread ◽  
Market Pricing ◽  
Yield Spreads ◽  
Ex Ante ◽  
The Impact

This paper studies the link between secondary market liquidity for a corporate bond and the bond’s yield spread at issuance. Using ex-ante measures of expected liquidity at the time of issuance, based on the characteristics of the underwriting syndicate, we find an economically large impact of liquidity on yield spreads. We estimate that a 10% increase in expected liquidity implies a decrease in the yield spread at issuance of between 8% and 14%. Our results suggest that liquidity has an important effect on firms’ cost of capital, and they contribute to the literature which examines the impact of liquidity on asset 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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