@article {Chakravarty6, author = {Sugato Chakravarty and Padma Kadiyala}, title = {Ex Ante Estimation of a Firm{\textquoteright}s Distress Risk Parameters from Bond Transaction Data}, volume = {19}, number = {2}, pages = {6--22}, year = {2009}, doi = {10.3905/jfi.2009.19.2.006}, publisher = {Institutional Investor Journals Umbrella}, abstract = {In this paper, we exploit the information in a publicly traded company{\textquoteright}s stock and bond prices to es-timate its default probability and recovery rate. We document that estimated probabilities of default and recovery rates exhibit cross-sectional variation with the ratio of book to market equity and with industry affiliation. Additionally, dividend yield, and the term premium in Treasury bond yields influ-ence temporal variation in aggregate probabilities of default and in recovery rates. Such findings provide a deeper understanding of how default probability and recovery rate interact to determine the outcome when a firm ends up in financial distress.TOPICS: Fixed-income portfolio management, credit risk management, fundamental equity analysis, statistical methods}, issn = {1059-8596}, URL = {https://jfi.pm-research.com/content/19/2/6}, eprint = {https://jfi.pm-research.com/content/19/2/6.full.pdf}, journal = {The Journal of Fixed Income} }