Previous empirical work suggests that, when using corporate bond indices, the yield spread sensitivity of corporate bonds to changes in the yield curve is negative and significant, especially for the A and BBB-rated bond categories. We use a sample of 5500 US corporate bonds to construct bond...

The yield to maturity (YTM) or internal rate of return (IRR) is a metric used in financial analysis to estimate the profitability of potential investments. Almost all finance textbooks state the following conditioning assumptions:(i) that the coupon payments can be reinvested at a rate equal to...

Lack of shareholders' commitment about debt and investment policies increases the cost of debt by a quantity that we refer to as the agency (credit) spread. The agency spread increases with the number of periods for which debt holders are exposed to policies that decrease the value of debt: from...

In this article we illustrate how to price bonds and calculate the accrued interest, clean- and dirty price, from which we can compute a bond invoice i.e., the present value for a given cash investment in the bond. We present the classical bond pricing formulae and show how to modify this...

This paper is concerned with the valuation and analysis of risky debt instruments with arbitrary interest and principal payments subject to default risk. We use a discrete risk-neutral present value model with expected payments for risk-neutral investors and risk-free spot rates for the...

This paper investigates whether ETF returns lead the returns of underlying bonds and similar style bond funds. Bond prices are often stale due to their lack of liquidity, and price discovery may occur in ETFs and then in underlying bonds. As predicted, we find that ETF returns predict its own...

This paper examines the momentum effect and its causes, the persistence in default risk change in particular, in both corporate bond and stock markets. Using a comprehensive bond dataset, we observe a significant momentum effect in corporate bond returns and bond credit spread changes. The...

During the global financial crisis, stressed market conditions led to skyrocketing corporate bond spreads that could not be explained by conventional modeling approaches. This paper builds on this observation and sheds light on time-variations in the relationship between systematic risk factors...

This paper examines the relation between industry competition, credit spreads, and levered equity returns. I build a quantitative model where firms make investment, financing, and default decisions subject to aggregate and idiosyncratic risk. Firms operate in heterogeneous industries that differ...