Earticle

초록

영어

We investigate the effect of distress risk premiums on the performance of structural models of credit default swap (CDS) spreads. The results show that structural variables inspired by theory are more likely to fail in accounting for the CDS spreads of firms with higher distress risk. We argue that the distress risk premium embedded in CDS spreads is culpable in hampering empirical studies using the structural approach because the distress risk premiums are unrelated to firm-specific default rates. Rather, the main driving forces of distress risk premiums are market-wide factors. Our findings point a new direction to resolve the credit spread puzzle.

목차

Abstract
 1. Introduction
 2. A preliminary analysis and motivation
 3. Empirical analysis
  3.1 CDS spreads contain DRPs
  3.2 DRPs are unrelated to firm-specific default factors
  3.3 A higher DRP proportion leads to weaker explanatory power
 4. Robustness checks
  4.1 A model-free measure of DRPs
  4.2 The results of robustness tests
 5. Conclusion
 Appendix
 References

키워드

저자

• Jungmu Kim [ College of Business, KAIST, 85 Hoegiro, Dongdaemun-gu, Seoul 130-722, Korea ]
• Woonjun Sung [ College of Business, KAIST, 85 Hoegiro, Dongdaemun-gu, Seoul 130-722, Korea ] Corresponding author

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• 간행물명

  한국재무학회 학술대회

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• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330