Time-Varying Asset Volatility and the Credit Spread Puzzle

• 成果类型: Article
• 署名作者: Du, Du; Elkamhi, Redouane; Ericsson, Jan
• 署名单位: City University of Hong Kong; University of Toronto; McGill University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12765
• 发表日期: 2019
• 页码: 1841-1885
• 关键词: maximum-likelihood-estimation; DEFAULT SWAP SPREADS; stochastic volatility; term structure; corporate-debt; RISK; options; bond; distress; implicit

摘要

Most extant structural credit risk models underestimate credit spreads-a shortcoming known as the credit spread puzzle. We consider a model with priced stochastic asset risk that is able to fit medium- to long-term spreads. The model, augmented by jumps to help explain short-term spreads, is estimated on firm-level data and identifies significant asset variance risk premia. An important feature of the model is the significant time variation in risk premia induced by the uncertainty about asset risk. Various extensions are considered, among them optimal leverage and endogenousdefault.