The default and liquidity premia of corporate bonds: evidence from the trade reporting and compliance engine

Yongkil Ahn

Applied Economics Letters, 2021, vol. 28, issue 15, 1271-1276

Abstract: This study combines information in the Trade Reporting and Compliance Engine (TRACE), the most extensive bond database, with other fixed income data sets in order to quantify the default and liquidity premia in a reduced form framework at the bond level. The results show that the default premium is two to three times as large as the liquidity premium, and the liquidity term structure is not decreasing in the time to maturity.

Date: 2021
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DOI: 10.1080/13504851.2020.1808169

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