Liquidity and credit risk

• 成果类型: Article
• 署名作者: Ericsson, Jan; Renault, Olivier
• 署名单位: McGill University; University of Warwick
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2006.01056.x
• 发表日期: 2006
• 页码: 2219-2250
• 关键词: capital structure; corporate-debt; securities; bankruptcy; valuation; spreads

摘要

We develop a structural bond valuation model to simultaneously capture liquidity and credit risk. Our model implies that renegotiation in financial distress is influenced by the illiquidity of the market for distressed debt. As default becomes more likely, the components of bond yield spreads attributable to illiquidity increase. When we consider finite maturity debt, we find decreasing and convex term structures of liquidity spreads. Using bond price data spanning 15 years, we find evidence of a positive correlation between the illiquidity and default components of yield spreads as well as support for downward-sloping term structures of liquidity spreads.