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Credit Risk in Private Debt Portfolios

Author

Listed:
  • Mark Carey

    (Federal Reserve Board and Society of Actuaries Asset Risk Experience Study Private Placement Subcommittee)

Abstract

Default, loss severity, and average loss rates for a large sample of privately placed bonds are presented and compared with loss experience for publicly issued bonds. The chance of very large portfolio losses is estimated and some determinants of such losses are analyzed. Results show ex ante riskier classes of private debt perform better on average than public debt. Both diversification and the riskiness of individual portfolio assets influence the bad tail of the portfolio loss distribution. Private placements are similar to corporate loans in that both are monitored private debt. The results are thus relevant to management and securitization of private debt portfolios generally. Copyright The American Finance Association 1998.

Suggested Citation

  • Mark Carey, 1998. "Credit Risk in Private Debt Portfolios," Journal of Finance, American Finance Association, vol. 53(4), pages 1363-1387, August.
    • Handle: RePEc:bla:jfinan:v:53:y:1998:i:4:p:1363-1387
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