This Paper analyses the effect of dynamic capital structure adjustments on credit risk. Firms may optimally adjust … find that the underestimation of credit spreads and expected default frequencies is exacerbated when the risk … it is shown that the Value-at-Risk of corporate bonds increases with the distance to default (DD) both for very low and …

We examine the risk-return characteristics of a rolling portfolio investment strategy where more than six thousand … turnover and low leverage, which may lower systematic risk exposures. To examine this possibility, we launch an easily … constructed ‘low minus high’ (LMH) stock turnover portfolio as a liquidity risk factor. The LMH factor produces significant betas …

political risk. We focus on two choice variables, the leverage and the ownership structure of the foreign affiliate, and we … distinguish different types of political risk, such as expropriation, corruption and confiscatory taxation. In our theoretical … analysis we find that, as political risk increases, the ownership share always decreases, whereas leverage can both increase or …