The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Usury Laws and Consumer Credit: A Note
Published: 09/01/1983 | DOI: 10.1111/j.1540-6261.1983.tb02299.x
RICHARD L. PETERSON
DISCUSSION
Published: 05/01/1981 | DOI: 10.1111/j.1540-6261.1981.tb00473.x
RICHARD L. PETERSON
The Resiliency of the High‐Yield Bond Market: The LTV Default
Published: 09/01/1989 | DOI: 10.1111/j.1540-6261.1989.tb02641.x
CHRISTOPHER K. MA, RAMESH P. RAO, RICHARD L. PETERSON
This paper investigates the resiliency of the new‐issue high‐yield bond market by examining the changes in implied default rates of such bonds before and after the largest high‐yield bond default, i.e., the LTV bankruptcy. Specifically, the paper compares implied default probabilities of high‐yield bonds during the post‐LTV period calculated from actual new‐issue yields with instrumental default probabilities calculated on the assumption that the default had not occurred. A comparison of these probabilities reveals that the market's perception of default on the high risk segment of the bond market increased significantly after the LTV bankruptcy. However, the effect was transitory, lasting only six months. Thus, the market was resilient to a major default.