Is the credit spread puzzle a myth?

• 成果类型: Article
• 署名作者: Bai, Jennie; Goldstein, Robert S.; Yang, Fan
• 署名单位: Georgetown University; National Bureau of Economic Research; University of Minnesota System; University of Minnesota Twin Cities; University of Connecticut
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2020.02.009
• 发表日期: 2020
• 页码: 297-319
• 关键词: Credit spread puzzle; structural models; Tail risk

摘要

We revisit Feldhater and Schaefer (FS, 2018), who report evidence of a credit spread puzzle for high-yield but not investment-grade bonds. We show their results are reversed when their model is calibrated to market values of debt (as required by theory) rather than book values. We then demonstrate that using credit spreads rather than historical default rates to identify the default boundary provides the statistical power necessary to reject their assumption that firm dynamics follow geometric Brownian motion. A large market price of jump risk is required to match historical default rates, which generates a credit spread puzzle for investment-grade but not high-yield bonds. (C) 2020 Elsevier B.V. All rights reserved.