type="main" <p>We examine the information content of Australian credit rating announcements by measuring the abnormal changes in credit default swap (CDS) spreads. CDS spreads provide a direct view of credit quality and thus should impound information quickly when investors receive new credit risk...</p>

Company financial reports are likely to be systematically biased. In this paper, we extend the Duffie and Lando (2001) model with a skewness correction which can account for both random and directional components of reporting noise.

The evolution of firms is not necessarily uniform. Exploring how this affects credit risk models, we find that firm life cycle provides additional explanatory power not captured by age. Firm age has an ambiguous effect on default risk and its impact during periods of high volatility is...

This study investigates the ability of the CreditGrades model to estimate Credit Default Swap (CDS) spreads by comparing the difference between model and market spreads using a number of volatility inputs. We then develop a convergence style capital structure arbitrage trading strategy and test...

We analyse the determinants of Australian corporate credit default swap (CDS) spreads. In addition to structural determinants, consisting of equity returns, equity volatility and risk-free interest rates, we show that CDS spreads are impacted by the uncertainty of asset values as proxied by the...

This paper explores the economic determinants of market-assessed sovereign risk of members of the European monetary union. The empirical work is innovative in its Merton structural specification of appropriate inputs. It provides a theoretical background for the empirical investigation of...

We propose a new method for computing a lower bound to the expected future dividend component of the market risk premium from observed option prices. We find that our estimate of future dividend yields has similar characteristics to future realized dividend yields, exhibits significant...