This paper quantifies the premium demanded by the investors for bearing the corporate default risk. We propose a novel … restrictions provided by a structural model of credit risk. By pinning down the daily dynamics of the market value of debt, we … deliver daily estimates of the full term structure of the default risk premium for worldwide non-financial firms. We show that …

, Hilscher, and Szilagyi, 2008) and the positive distress risk premium-return relation (Friewald, Wagner, and Zechner, 2014). We … market risk premium in distressed firms; (ii) negative covariance generates low stock returns and negative alphas among those … firms; and (iii) firms with a lower distress risk premium endogenously choose higher leverage, so they are more likely to …