I use the 2007-2008 financial crisis to gauge how internal financial resources and external financial constraints mitigate or worsen the impact of the crisis on default risk of US industrial firms. I identify heterogeneity in short-term funding needs at the onset of the crisis by exploiting...

We document a higher bond return volatility around the time of default for bonds included in CDS auctions (especially cheapest-to-deliver bonds) versus those that are not, while controlling for firm fundamentals and bond illiquidity. This finding does not extend to time periods far ahead of...

We formulate a Cournot-type market equilibrium model of simultaneous trading in the CDS and Loan CDS (LCDS) markets. We use novel formulations of two-market demand functions that include trading costs and margins. The equilibrium identifies a relation between premiums, elasticities and recovery...

We investigate the informational content of credit default swap (CDS) spreads for future volatility of (firm) assets and equity. In the cross-section, CDS spreads are significantly more informative about future asset than equity volatility. The informational content of historical and option...

Islamic strictures require investors to share risks with the entrepreneurs they finance. Sukuk (Islamic securities) come mostly in two varieties, musharakah (basically a joint venture agreement) and ijarah (more like an operational lease agreement). Yet defaults did happen, even in the case of...

In this paper, we present effect of the liquidity on risky bonds pricing. The liquidity effect is represented by the adjustment to the single price format. We begin with bid-ask pricing format and it helps to observe effect of the liquidity on each step of pricing. In the first section, we...

Using a structural model of default, we construct a measure of systemic default defined as the probability that many firms default at the same time. We account for correlations in defaults between firms through exposures to common shocks. The systemic default measure spikes during recession...

Taking advantage of recently augmented corporate bond transaction data, we examine the pricing implications of informed trading in corporate bonds and its ability to predict corporate defaults. We find that microstructure measures of information asymmetry seem to capture adverse selection in...

The aim of this paper is to generalize the comprehensive structural model for defaultable fixed income bonds (considered in) into a comprehensive unified model of structural and reduced form models. In our model the bond holders receive the deterministic coupon at predetermined coupon dates and...

This study estimates the parameters of credit derivatives, equity derivatives and structural models for bank recapitalisation in Nigeria by employing contingent convertibles (CoCos) and using the Nigeria Treasury Bill rate for 2009 as the risk-free rate, estimated recapitalisation requirements...