What drives corporate default risk premia? Evidence from the CDS market

This paper studies the evolution of the default risk premia for European firms during the years surrounding the recent credit crisis. We employ the information embedded in Credit Default Swaps (CDS) and Moody’s KMV EDF default probabilities to analyze the common factors driving this risk premia. The risk premium is characterized in several directions: Firstly, we perform a panel data analysis to capture the relationship between CDS spreads and actual default probabilities. Secondly, we employ the intensity framework of Jarrow et al. (2005) in order to measure the theoretical effect of risk premium on expected bond returns. Thirdly, we carry out a dynamic panel data to identify the macroeconomic sources of risk premium. Finally, a vector autoregressive model analyzes which proportion of the co-movement is attributable to financial or macro variables. Our estimations report coefficients for risk premium substantially higher than previously referred for US firms and a time varying behavior. A dominant factor explains around 60% of the common movements in risk premia. Additionally, empirical evidence suggests a public-to-private risk transfer between the sovereign CDS spreads and corporate risk premia.

Idiosyncratic risk really drives stock returns; Spanish evidence

Following the theoretical model of Merton (1987), we provide a new perspective of study about the role of idiosyncratic risk in the asset pricing process. More precisely, we analyze whether the idiosyncratic risk premium depends on the idiosyncratic risk level of an asset as well as the vatriation in the market-wide measure of idiosyncratic risk. As expected, we obtain a net positive risk premium for the Spanish stock market over the period 1987-2007. Our results show a positive relation between returns and individual indiosyncratic risk levels and a negative but lower relation with the aggregate measure of idiosyncratic risk. These findings have important implications for portfolio and risk management and contribute to provide a unified and coherent answer for the main and still unsolved question about the idiosyncratic risk puzzle: whether or not there exists a premium associated to this kind of risk and the sign for this risk premium.

Du télégraphe à internet: enjeux politiques liés aux technologies de l’information

Parmi les questions centrales portant sur les implications d’Internet, certaines présentent des points en commun avec celles qui ont vu le jour à l’époque du bouleversement dans les communications provoqué par l’apparition du télégraphe au XIXe siècle.