sector and the value of its physical capital.

value of its physical capital.

We identify a common default risk premia (DRP) factor in the risk-adjusted excess returns on pure default-contingent claims. Asset pricing tests using almost 50 corporate bond portfolios sorted on rating, maturity or industry suggest that the DRP factor is priced in the corporate bond market....

Common variation in the prices of European corporate debt may not always be associated with a rational response to an increase in the relative importance of a macroeconomic risk factor. Building on Campbell’s ICAPM framework, we show that risk premia of assets with nonlognormal return...

This paper investigates the determinants of the default risk premia embedded in the European credit default swap spreads. Using a modified version of the intertemporal capital asset pricing model, we show that default risk premia represent compensation for bearing exposure to systematic risk and...

Nearly half of the variation in European CDS returns is captured by a novel factor that mimics economic catastrophe risk. During the financial crisis of 2007--8, this factor became more important relative to other sources of risk, leading to a shift in the correlation structure of CDS returns....