Economics, Econometrics and Finance
8 years ago

Low-rated corporate bond holders compensated for default losses, study finds.

The Journal of Finance
The Default Premium and Corporate Bond Experience
Jerome S. Fons

Paper Summary

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The article explores how risky corporate bonds are priced based on the likelihood of the company defaulting on its debt. By analyzing past default rates and economic data, the study shows that investors in low-rated bonds are typically compensated for the risk of potential losses from defaults.