À繫¿¬±¸ Á¦ ±Ç È£ (2010³â 11¿ù)
Asian Review of Financial Research, Vol., No..
pp.88~120
pp.88~120
An Empirical Study of Credit Spreads in an Emerging Market : The Case of Korea
Keehwan Park
Chang Mo Ahn
Dohyeon Kim
Saekwon Kim
Empirically we test the Merton-type model (1974) of credit risk in an emerging market such as the Korean corporate bond market. For that purpose, we assume two alternative firm value processes: Diffusion process for the Merton (1974) model and jump-diffusion process for our extended model in a general equilibrium setting. Our empirical results show that the diffusion model generally underpredicts spreads ? which is referred to as ¡°the credit spread under prediction puzzle¡± in the literature, while our jump-diffusion model somewhat raises the predicted spreads. We assert that jump raises the spreads on two grounds. Firstly, an extremely large (negative) change tends to increase the probability for a firm to default particularly over a short-time horizon. Secondly, jump requires the systematic risk premium for a positively correlated firm particularly when the market turns extremely volatile.
Keehwan Park
Chang Mo Ahn
Dohyeon Kim
Saekwon Kim
Empirically we test the Merton-type model (1974) of credit risk in an emerging market such as the Korean corporate bond market. For that purpose, we assume two alternative firm value processes: Diffusion process for the Merton (1974) model and jump-diffusion process for our extended model in a general equilibrium setting. Our empirical results show that the diffusion model generally underpredicts spreads ? which is referred to as ¡°the credit spread under prediction puzzle¡± in the literature, while our jump-diffusion model somewhat raises the predicted spreads. We assert that jump raises the spreads on two grounds. Firstly, an extremely large (negative) change tends to increase the probability for a firm to default particularly over a short-time horizon. Secondly, jump requires the systematic risk premium for a positively correlated firm particularly when the market turns extremely volatile.
Diffusion Process,Jump-Diffusion Process,Credit Risk,Spread Under Prediction Puzzle,Risk-Neutral Probability Distribution
[ 07327 ] 67-8, Yeouinaru-ro, Yeongdeungpo-gu, Seoul, Korea TEL. +82-2-2003-9921 FAX. +82-2-2003-9979 E-mail. office@korfin.org COPYRIGHT(C) SINCE 1987 KOREAN FINANCE ASSOCIATION. All rights reserved.