Loans Are Cheap to Default Risk

Fridson, Martin
August 2010
High Yield Report;8/9/2010, Vol. 21 Issue 32, p29
The author discusses the link between default risk and the risk premium on leveraged loans. After regressing the discount margin in the leveraged loan index of Credit Suisse and the quarterly default rate, the author found a strong statistical relationship between the two in the context of econometrics. The author also noted that a double-dip recession concerns investors as it may escalate default rates.


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