Artikel
The determinants of market-implied recovery rates
In the presence of recovery risk, the recovery rate is a random variable whose risk-neutral expectation can be inferred from the prices of defaultable instruments. I extract market-implied recovery rates from the term structures of credit default swap spreads for a sample of 497 United States (U.S.) corporate issuers over the 2005-2014 period. I analyze the explanatory factors of market-implied recovery rates within a linear regression framework and also within a Tobit model, and I compare them with the determinants of historical recovery rates that were previously identified in the literature. In contrast to their historical counterparts, market-implied recovery rates are mostly driven by macroeconomic factors and long-term, issuer-specific variables. Short-term financial variables and industry conditions significantly impact the slope of market-implied recovery rates. These results indicate that the design of a recovery risk model should be based on specific market factors, not on the statistical evidence that is provided by historical recovery rates.
- Sprache
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Englisch
- Erschienen in
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Journal: Risks ; ISSN: 2227-9091 ; Volume: 7 ; Year: 2019 ; Issue: 2 ; Pages: 1-15 ; Basel: MDPI
- Klassifikation
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Wirtschaft
- Thema
-
recovery rate
credit risk
loss given default
- Ereignis
-
Geistige Schöpfung
- (wer)
-
François, Pascal
- Ereignis
-
Veröffentlichung
- (wer)
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MDPI
- (wo)
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Basel
- (wann)
-
2019
- DOI
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doi:10.3390/risks7020057
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Artikel
Beteiligte
- François, Pascal
- MDPI
Entstanden
- 2019
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