This paper uses Duffie and Singleton (1999) discount model for defaultable bonds to infer the presence of a preferential credit treatment (PCT) for Multilateral Development Banks (MDBs) in loss given default (LGD) space. The main inferences from the paper are twofold. -1- Lower lending fees in...

Rating migration variation or volatility, as rating migration uncertainty, is a real-life phenomenon that can be measured empirically. The study extends reduced form bond valuation models based on rating migration (matrices) by allowing variation in the rating migration matrix, as opposed to...

Empirical tests of reduced form models of default attribute a large fraction of observed credit spreads to compensation for jump-to-default risk. However, these models preclude a “contagion-risk” channel, where the aggregate corporate bond index reacts adversely to a credit event. In this...