+1 Added to my documents.
Please be aware your selection is temporary depending on your cookies policy.
Remove this selection here

Designing a corporate bond index on solvency criteria

Doubts are rising whether bond indices, in the way they are constructed, are effective in their role of representing the markets they are designed for. Since index constituents are defined on market shares –the larger the debt obligation, the larger the share in the index– it may be that certain risks related to a high level of indebtedness are being accentuated and not necessarily representative of the market as a whole. Undue debt levels would in theory not arise in an information-efficient market, however, if prices are distorted, it makes sense to compensate for that and add elementary information on the debt issuers to the index construction process. We test how that works out on corporate bonds. We build a bond index that is based on firm accounting data rather than debt market value, and give evidence that it may serve as a market proxy.

Amundi Working Paper - June  2016

Lauren STAGNOL, Fixed Income Quantitative Research at Amundi

Download this article in PDF format

Send by e-mail
Designing a corporate bond index on solvency criteria
Was this article helpful?YES
Thank you for your participation.
0 user(s) have answered Yes.