Financial innovation and corporate default rates
نویسندگان
چکیده
Measured default rates are currently at historically low levels. Compared to a historical average of 2%, Moody’s 12-month trailing corporate default rate was 0.50% in September 2007. Even more striking, the default rate had fallen since January 2007 whereas some measures of economic fundamentals had worsened over this period of time. For example, the equity implied volatility had more than doubled, and high-yield corporate bond credit spreads had increased more than 100 basis points during this period. In fact, it appears that measured default rates have been lower than predictions by forecasters and ratings agencies at least since 2006.
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