Abnormal Presidential Premium, Controlling for Default Premium
This table reports the results from the estimation of the following regression: [r.
1) As interest rates on this form of borrowing have been falling during the past three years, it is unlikely that any default premium
In the "Pricing the Default Risk" section the concept of default premium
in the zero-utility framework is posed.
Subtracting rates on comparable-maturity Treasuries from these yields produces something that looks like a default premium
The analysis shows that variables such as the market portfolio, the term structure, the default premium
, and the consumption-aggregate wealth ratio positively affect average asset returns and command positive risk premia while the inflation portfolio negatively affects returns and commands a negative premium.
This risksharing advantage translates into a lower default premium
on FDI and a smaller response to changes in a country's financing constraint.
They define the default premium
as the difference between the yield on a market portfolio of corporate bonds or stocks and the yield on similar-maturity Aaa bonds.
15 displays a default premium
ranging from seven basis points (at V = 200, or a debt ratio of 50%) to one basis point (at V = 400).
Both credit default premium
and junk bond spreads are pushing new lows.
Default risk or the bond default premium
, is measured by the long term corporate to government yield spreads (DEF).
There is no risk or default premium
baked into British interest rates to indicate that fear of political-economic chaos down the road is discouraging investment.
Junk bond spreads and credit default premiums
are at their lowest levels since before the Lehman Brothers collapse; but they are still well above the levels seen before the financial system began to come apart in 2007.