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The study proposes and tests a risk-free rate model that simultaneously lets the risk-free rate migrate between rating categories as risk-free rate ranges, and follow a random walk within rating categories as risk-free rate ranges. Although the study arbitrarily assigned rating categories, and...
Persistent link: https://www.econbiz.de/10012063080
The study inquires whether ratings and rating changes in particular have anyimpact on bond prices. In doing so, the price data of a number of corporate vanillabonds were investigated over corresponding rating change event periods.For various reasons, the South African Bond Market could not...
Persistent link: https://www.econbiz.de/10009447555
The study examines rating migration, and default probability term structures obtained from rating migration matrices. It expands on the use of rating migration matrices with reduced form bond valuation models, by formally delineating the probability of default according to the likely rating...
Persistent link: https://www.econbiz.de/10012966398
The study continues previous work on decomposing rating migration matrices from market prices. It further investigates the matter of the associated optimization problem, in plain form, yielding multiple possible local solutions. The sources of non-linearity and complexity of the optimization...
Persistent link: https://www.econbiz.de/10012860083
The study revisits the method and premises of decomposing rating migration matrices from price data. Significantly easier, and more accurate method is presented. As an intermediary step, default and non-default probability term structures are first decomposed from market prices. This represents...
Persistent link: https://www.econbiz.de/10012861694
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...
Persistent link: https://www.econbiz.de/10012861872
The paper continues an equity valuation model based on a random process modelling of earnings and book value, coupled with rating categories and rating migration. In essence, earnings and book value probability distributions are related to rating categories, and the probability of an issue to...
Persistent link: https://www.econbiz.de/10012862380