This paper analyzes the influence of downside risk on defaultable bond returns. By introducing a defaultable bond …-trading model, we show that the decline in market risk tolerance and information accuracy leads to trading loss under downside … conditions. Our empirical analysis indicates that downside risk can explain a large proportion of the variation in yield spreads …

This paper studies the implications of perceived default risk for aggregate output and productivity. Using a model of …-level probabilities of default which can be applied using data on firm-level employment and default risk. We obtain direct estimates of … firms per year. As expected, we find a strong correlation between default risk and a firm's future performance. We estimate …