A Certainty Equivalent Approach to Municipal Bond Default Risk Estimation
This paper extends the risk-neutrality default model of municipal bonds to consider the effect of risk aversion on the estimation of default probability. A model is proposed to separate the default risk assessment from the investor's risk aversion. Empirical results show that the risk-neutrality model consistently overestimates the default probability but that the magnitude of this overestimate is generally small and statistically insignificant.
Year of publication: |
1991
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Authors: | Wu, Chunchi |
Published in: |
Journal of Financial Research. - Southern Finance Association - SFA, ISSN 0270-2592. - Vol. 14.1991, 3, p. 241-47
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Publisher: |
Southern Finance Association - SFA Southwestern Finance Association - SWFA |
Saved in:
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