2009/12/23 by Arthur M. Berd, Berd, Arthur M., Roy Mashal +3
Economics, Econometrics and Finance · #Credit Risk and Financial Regulations #FOS: Economics and business #Insurance and Financial Risk Management #Pricing of Securities (q-fin.PR)
paper · pdf · doi:10.48550/arxiv.0912.4609
openalex publication_date 2009/12/23 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
In this three-part series of papers, we argue that the conventional spread measures are not well defined for credit-risky bonds and introduce a set of credit term structures which correct for the biases associated with the strippable cash flow valuation assumption. We demonstrate that the resulting estimates are significantly more robust and remain meaningful even when applied to deeply distressed bonds. We also suggest a new definition of credit bond duration and convexity which remains consistent for distressed bonds and introduce new relative value measures for individual bonds in the context of sector or issuer credit curves, as well as for the basis between cash bonds and credit default swaps (CDS).