Anderson, Ronald and Suresh Sundaresan, "A Comparative Study of Structural Models of Corporate Bond Yields: An exploratory investigation", Journal of Banking & Finance, Vol. 24, No. 1, (January 2000), pp. 255-269.

Abstract: This paper empirically compares a variety of firm-value-based models of contingent claims. We formulate a general model, which nests versions of the models introduced by Merton (1974), Leland (1994), Anderson and Sundaresan (1996), and Mella-Barral and Perraudin (1997). We estimate these using aggregate time series data for the US corporate bond market, monthly, from August 1970 through December 1996. We find that models fit reasonably well, indicating that variations of leverage and asset volatility account for much of the time-series variations of observed corporate yields. The performance of the recently developed models, which incorporate endogenous bankruptcy barriers, is somewhat superior to the original Merton model. We find that the models produce default probabilities, which are in line with the historical experience reported by Moody's.

JEL Classification: G3, C51, G33.

Keywords: Structural models, Default probabilities, Bond yields.

Download paper (290K PDF) 15 pages

[Home] [Credit Pricing Papers]

[ Home ]

Please contact me with problems or suggestions.
Copyright © 2000-2008 DefaultRisk.com
Last modified: September 07, 2008