Pascal François, Full Professor at the Department of Finance of HEC Montréal, Director of the Montreal Institute of Structured Finance and derivatives (IFSID) and Visiting Professor at CIRANO in Autumn 2017, gave a seminar entitled "Comoment Risk in Corporate Yields and Returns Bond" on Friday, March 23rd, 2018 at CIRANO.
He presented the highlights of the document "Comoment Risk in Corporate Bond Yields and Returns", published in October 2017, co-written with Stéphanie Heck (HEC Liège), Georges Hübner (HEC Liège and Maastricht University) and Thomas Lejeune (National Bank of Belgium).
This paper provides a comoment factor analysis of corporate bond returns using sector index bond portfolios. Corporate bond excess default returns are decomposed into systematic default risk premiums rewarding investors for exposure to default risk and net excess returns adjusting for actual market conditions. Higher order comoments contribute positively to systematic default risk premiums. Furthermore, covariance and cokurtosis lower net excess returns as they trigger more value losses. We show a gradual substitution effect between covariation and tail risk contributions to the systematic risk premium for higher maturities, indicating a shift from the pricing of downgrading to outright default risk.
When: Friday, March 23rd, 2018, 12:00 pm - 1:30 pm
Where: Center for Interuniversity Research and Analysis of Organizations
Pascal François' presentation
Center for Interuniversity Research and Analysis of Organizations
1130 rue Sherbrooke Ouest, suite 1400
Montréal, Québec (Canada) H3A 2M8
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