Accounting-based versus market-based cross-sectional models of CDS spreads |
| |
Authors: | Sanjiv R. Das Paul Hanouna Atulya Sarin |
| |
Affiliation: | 1. Santa Clara University, Leavey School of Business, 500 El Camino Real, Santa Clara, CA 95053, USA;2. Villanova University, Villanova School of Business, 800 Lancaster Avenue, Villanova, PA 19085, USA |
| |
Abstract: | Models of financial distress rely primarily on accounting-based information (e.g. [Altman, E., 1968. Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. Journal of Finance 23, 589–609; Ohlson, J., 1980. Financial ratios and the probabilistic prediction of bankruptcy. Journal of Accounting Research 19, 109–131]) or market-based information (e.g. [Merton, R.C., 1974. On the pricing of corporate debt: The risk structure of interest rates. Journal of Finance 29, 449–470]). In this paper, we provide evidence on the relative performance of these two classes of models. Using a sample of 2860 quarterly CDS spreads we find that a model of distress using accounting metrics performs comparably to market-based structural models of default. Moreover, a model using both sources of information performs better than either of the two models. Overall, our results suggest that both sources of information (accounting- and market-based) are complementary in pricing distress. |
| |
Keywords: | M41 G1 G12 C41 C52 |
本文献已被 ScienceDirect 等数据库收录! |
|