We investigate whether liquidity is an important price factor in the US corporate bond market. In particular, we focus on whether liquidity eects are more pronounced in periods of nancial crises, especially for bonds with high credit risk, using a unique data set covering more than 20,000 bonds,...

We examine the recovery rates of defaulted bonds in the US corporate bond market over the time period from 2002 to 2010, based on a complete set of traded prices and volumes. A detailed study of the microstructure of trading in defaulted bonds around various types of default events is provided....

Modeling default dependence for measuring and managing portfolio credit risk is one of the most challenging problems in modern finance. The standard industry model is a multi-variate Gaussian latent-variable model, where the latent variables are associated with log asset value processes. These...

We explore the link between a firm's stock returns and its credit risk using a simple insight from structural models following Merton (1974): risk premia on equity and credit instruments are related because all claims on assets must earn the same compensation per unit of risk. Consistent with...

We suggest a new parametric framework to assess the accuracy of estimated default probabilities (PDs). Whereas the traditional methods to validate credit rating systems focus primarily on the discriminatory power, recent advances in credit risk management and banking regulation has shifted the...