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Measuring Corporate Bond Mortality and Performance

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Author Info
 Altman, Edward I
Abstract

This study develops an alternative way to measure default risk and suggests an appropriate method to assess the performance of fixed-income investors over the entire spectrum of credit-quality classes. The approach seeks to measure the expected mortality of bonds and the consequent loss rates in a manner similar to the way actuaries assess mortality of human beings. The results show that all bond ratings outperform riskless Treasuries over a ten-year horizon and that, despite relatively high mortality rates, B-rated and CCC-rated securities outperform all other rating categories of the first four years after issuance, with BB-rated securities outperforming all others thereafter. Copyright 1989 by American Finance Association.

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File URL: http://links.jstor.org/sici?sici=0022-1082%28198909%2944%3A4%3C909%3AMCBMAP%3E2.0.CO%3B2-E&origin=repec
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Publisher Info
Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 44 (1989)
Issue (Month): 4 (September)
Pages: 909-22
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Handle: RePEc:bla:jfinan:v:44:y:1989:i:4:p:909-22

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  1. Mark B. Wise & Vineer Bhansali, 2002. "Portfolio Allocation to Corporate Bonds with Correlated Defaults," Quantitative Finance Papers nlin/0205011, arXiv.org, revised Jun 2002. [Downloadable!]
  2. Gordon Delianedis & Robert Geske, 2001. "The Components of Corporate Credit Spreads: Default, Recovery, Tax, Jumps, Liquidity, and Market Factors," University of California at Los Angeles, Anderson Graduate School of Management 1025, Anderson Graduate School of Management, UCLA. [Downloadable!]
  3. Mathias Schmit, 2003. "Is Automotive Leasing a Risky Business?," Working Papers CEB 03-009.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
  4. Siem Jan Koopman & André Lucas & Robert Daniels, 2005. "A Non-Gaussian Panel Time Series Model for Estimating and Decomposing Default Risk," Tinbergen Institute Discussion Papers 05-060/4, Tinbergen Institute. [Downloadable!]
    Other versions:
  5. Ragunathan V & Varma Jayant R, 1993. "When AAA Means B: The State of Credit Rating in India," IIMA Working Papers 1141, Indian Institute of Management Ahmedabad, Research and Publication Department. [Downloadable!]
  6. Chunsheng Zhou, 1997. "A jump-diffusion approach to modeling credit risk and valuing defaultable securities," Finance and Economics Discussion Series 1997-15, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  7. Edward J. Elton & Martin J. Gruber & Deepak Agrawal & Christopher Mann, 1999. "Explaining the Rate Spread on Corporate Bonds," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-082, New York University, Leonard N. Stern School of Business-. [Downloadable!]
  8. Steven N. Kaplan & Jeremy C. Stein, 1991. "How Risky is the Debt in Highly Leveraged Transactions? Evidence from Public Recapitalizations," NBER Working Papers 3390, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Nancy Eugenia Zamudio Gómez, . "Determinantes de la Probabilidad de Incumplimiento de las Empresas Colombianas," Borradores de Economia 466, Banco de la Republica de Colombia. [Downloadable!]
  10. David Brookfield, Phillip Ormrod, 2000. "Credit agency regulation and the impact of credit ratings in the international bond market," European Journal of Finance, Taylor and Francis Journals, vol. 6(4), pages 311-331, December. [Downloadable!] (restricted)
  11. L. Smith & Baiqiang Jin, 2007. "Modeling exposure to losses on automobile leases," Review of Quantitative Finance and Accounting, Springer, vol. 29(3), pages 241-266, October. [Downloadable!] (restricted)
  12. Stéphanie Duchemin & Marie-Paule Laurent & Mathias Schmit, 2003. "Asset return correlation: The case of automotive lease portfolios," Working Papers CEB 03-007.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
  13. Edward Altman, 1996. "Corporate Bond and Commercial Loan Portfolio Analysis," Center for Financial Institutions Working Papers 96-41, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
  14. Mark B. Wise & Vineer Bhansali, 2002. "Implications of Correlated Default For Portfolio Allocation To Corporate Bonds," Quantitative Finance Papers nlin/0209010, arXiv.org. [Downloadable!]
  15. Richard A. Graff, 2001. "Off-Balance-Sheet Corporate Finance with Synthetic Leases: Shortcomings and How to Avoid Them with Synthetic Debt," Journal of Real Estate Research, American Real Estate Society, vol. 22(1/2), pages 213-242. [Downloadable!]
  16. Nancy Eugenia Zamudio Gómez, 2007. "Determinantes de la Probabilidad de Incumplimiento de las Empresas Colombianas," BORRADORES DE ECONOMIA 004292, BANCO DE LA REPÚBLICA. [Downloadable!]
  17. Augusto Castillo R., 2001. "Long-Run Performance Of Stock Returns Following Junk Bond Offerings," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 4(1), pages 95-129. [Downloadable!]
  18. Jarko Fidrmuc & Christa Hainz & Anton Malesich, 2006. "Default Rates in the Loan Market for SMEs: Evidence from Slovakia," William Davidson Institute Working Papers Series wp854, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  19. Edward Altman & Anthony Saunders, 2000. "An Analysis and Critique of the BIS Proposal on Capital Adequacy and Ratings," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-084, New York University, Leonard N. Stern School of Business-. [Downloadable!]
  20. Marie-Paule Laurent, 2004. "Asset Return Correlation in Basel II: Implications for Credit Risk Management," Working Papers CEB 04-017.RS, Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB). [Downloadable!]
  21. Edward I. Altman & Luis Beltran, 2000. "Market Size and Investment Performance of Defaulted Bonds & Bank Loans: 1987-1998," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-004, New York University, Leonard N. Stern School of Business-. [Downloadable!]
  22. Richard A. Graff & John Tung, 1992. "Default Risk and Required Return in the Commercial Mortgage Market," Journal of Real Estate Research, American Real Estate Society, vol. 7(1), pages 13-32. [Downloadable!]
  23. Stefan Sundgren, 1998. "Does a Reorganization Law Improve the Efficiency of the Insolvency Law? The Finnish Experience," European Journal of Law and Economics, Springer, vol. 6(2), pages 177-198, September. [Downloadable!] (restricted)
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