Liquidity Risk Factors for Bonds
22 Pages Posted: 16 Aug 2009
Date Written: August 14, 2009
Abstract
The main purpose of the paper is to define a model to estimate the liquidity risk for bonds, since very frequently their volatility price is lower than what appears after some shocks. The expected output will be generated comparing qualitative and quantitative methodologies, such as bond portfolio managers and statistical analysis.
The explaining variables for bond liquidity risk are: currency, exchange, issue date, maturity, coupon type, coupon, duration, yield, rating Moody, rating S&P, default, outstanding, and, finally, the existence of some options.
The main factors which lead to the estimation of liquidity risk are whether the bonds are listed, the default of the bond and maturity.
The fitting of the model is measured comparing theoretical outcomes with the qualitative indications of some senior portfolio managers.
Keywords: Liquidity risk, corporate bond, discriminant analysis, logit
JEL Classification: G11, G12
Suggested Citation: Suggested Citation
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