We examine the interactive effect of default and interest rate risk on duration of defaultable bonds. We show that duration for defaultable bonds can be longer or shorter than default-free bonds depending on the relation between default intensity and interest rates. Empirical evidence indicates...

The root cause of systemic risk is an issue of on-going debate. We document evidence that common shocks of macroeconomic fundamentals are key driver of US state systemic credit risk. A structure model is developed to show importance of economic fundamentals. We find that macroeconomic variables...