Background: Corporate bonds are crucial for corporations as they provide a flexible and often less costly alternative to equity financing. However, rising corporate debt levels, along with rating downgrades and economic uncertainty, can cause corporations to face financial distress, exacerbating...

Standard approaches to estimating credit default probability estimation have certain drawbacks, most importantly regarding the underestimation of the true default probability which remains an undesirable property in sovereign risk management. As an alternative, this research applies a...