Survival and Default of Original Issue High-Yield Bonds

Financial Management, Vol. 32, No. 1, Spring 2003

Posted: 27 May 2003

See all articles by Thomas Moeller

Thomas Moeller

Texas Christian University - Neeley School of Business

Carlos Alberto Molina

IESA

Abstract

We study the default behavior of original issue high-yield bonds to answer the open question of how the probability of default changes over time. We use a flexible econometric method, the Cox proportional hazard, to model the default behavior of junk bonds over their life. The method allows us to include the impact of issue and issuer characteristics on the probability of and the time to default in the estimation. Using a large comprehensive sample, we find that the bonds face a constantly increasing default risk over time, with the most significant increase beyond four years after issuance.

Keywords: Junk Bonds, high-yield bonds, default probability, hazard models

JEL Classification: C41, G10, G33

Suggested Citation

Moeller, Thomas and Molina, Carlos Alberto, Survival and Default of Original Issue High-Yield Bonds. Financial Management, Vol. 32, No. 1, Spring 2003, Available at SSRN: https://ssrn.com/abstract=381521

Thomas Moeller

Texas Christian University - Neeley School of Business ( email )

TCU Box 298530
Fort Worth, TX 76129
United States
817.257.7457 (Phone)

HOME PAGE: http://www.thomasmoeller.net

Carlos Alberto Molina (Contact Author)

IESA ( email )

IESA, dept of Finance
Av. IESA, San Bernardino
Caracas, DF 1010
Venezuela
+58-212-555.4551 (Phone)
+58-212-555.4446 (Fax)

HOME PAGE: http://www.iesa.edu.ve/profesores-e-investigacion/profesores/P088

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