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A Note on Bond Risk Differential

Published online by Cambridge University Press:  06 April 2009

Ahmet Tezel
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Extract

In a recent paper published in this journal [1], Bierman and Hass (BH) developed a model in which the risk differential that an investor would require to compensate him for the risk of default is stated as a function of the following variables: the probability of default on annual interest payments, (1-P1); the probability of default on the principal payment at the end of the maturity of the bond, (1-P2); the default-free rate, i, and the maturity, N.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 13 , Issue 3 , September 1978 , pp. 573 - 575
Copyright
Copyright © School of Business Administration, University of Washington 1978

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References

REFERENCES

[1]Bierman, Harold Jr, and Hass, E. Jerome. “An Analytic Model of Bond Risk Differentials.” Journal of Financial and Quantitative Analysis (12 1975), pp. 757–774.CrossRefGoogle Scholar
[2]Pye, Gordon, and Tezel, Ahmet. “Optimal Foreclosure Policies.” Management Science (10 1974), pp. 141–147.CrossRefGoogle Scholar
[3]Van Home, C. James. “Optimal Initiation of Bankruptcy Proceedings by Debt Holders.” The Journal of Finance (06 1976), pp. 897–910.CrossRefGoogle Scholar