This paper examines the relation between industry competition, credit spreads, and levered equity returns. I build a quantitative model where firms make investment, financing, and default decisions subject to aggregate and idiosyncratic risk. Firms operate in heterogeneous industries that differ...

We embed a structural model of credit risk inside a dynamic continuous-time consumption-based asset pricing model, which allows us to price equity and corporate debt in a unified framework. Our key economic assumptions are that the first and second moments of earnings and consumption growth...

This paper is concerned with the valuation and analysis of risky debt instruments with arbitrary interest and principal payments subject to default risk. We use a discrete risk-neutral present value model with expected payments for risk-neutral investors and risk-free spot rates for the...

This paper shows that standard disaster risk models are inconsistent with the behavior of stock market volatility and credit spreads during disasters. We resolve this shortcoming by incorporating persistent macroeconomic crises into a structural credit risk model. The model successfully captures...

Whereas the callable-bond market used to emphasize primarily public debt - Government Agencies, and both investment grade and non-investment corporate debt - that has changed dramatically over the past twenty years, in part due to the low prevailing rates of interest as well as some systematic...

During the global financial crisis, stressed market conditions led to skyrocketing corporate bond spreads that could not be explained by conventional modeling approaches. This paper builds on this observation and sheds light on time-variations in the relationship between systematic risk factors...

During the global financial crisis, stressed market conditions led to skyrocketing corporate bond spreads that could not be explained by conventional modeling approaches. This paper builds on this observation and sheds light on time-variations in the relationship between systematic risk factors...

Using implied-CDS risk premium measures, we find that these variables have higher explanatory power for cross-sectional bond returns than the traditional default spread and ratings. The positive effect of the credit risk premium (CRP) factor on expected returns is pervasive, stronger for...

A small but ambitious literature uses affine arbitrage-free models to estimate jointly U.S. Treasury term premiums and the term structure of equity risk premiums. Within this approach, this paper identifies the parameter restrictions that are consistent with a simple dividend discount model,...