Research of Dollar Value of Default Risk in Bond Market

• Main Authors: Po-Chang Shen, 沈柏蒼
• Other Authors: Yun-Yung Lin
• Format: Others
• Language: zh-TW
• Published: 2000
• Online Access: http://ndltd.ncl.edu.tw/handle/23714474350214910959

碩士 === 淡江大學 === 財務金融學系 === 88 === This dissertation uses the option valuation framework to identify and investigate the factors affecting the cross-sectional differences in individual corporate bonds'' default risk . The dollar value of default risk (DVDR) is measured by subtracting the observed trading price of a risky corporate bond from a Cox-Ingersoll-Ross model value of a corresponding pseudo-default-free bond . From an option pricing perspective , DVDR can be viewed as the value of a put option on the firm''s risky assets .The DVDR of an individual corporate bond is hypothesized to be related to the bond rating , the time to maturity of the bond , the size of the issuing firm , the volatility of firm value , and the dividend yield of the issuing firm . According to the empirical results , there is a positive relationship between DVDR and the three affecting factors(the face value of the risky bond over the market value of issuing firm、the time to maturity of the bond and the volatility of firm value) And there is only a weaker positive relationship between DVDR and dividend yield . At the same time , there is a negative relationship between DVDR and the size of the issuing firm . As the bond rating moves from A to BBB , the differential effect of the first four factors strengthens , but there is no effective between DVDR and dividend yield as the bond rating drops .