Foundations of High-Yield Analysis

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Abstract

This Research Foundation brief explores various dimensions of the high-yield bond market. One contributor decomposes returns and relates risk and associated risk premiums via an econometric fair value model. Another illustrates principles of credit analysis via a case study involving a debt-financed merger. A third analytical piece focuses on forecasting the default rate. Two remaining contributions are primers—one on the corporate bankruptcy process and the other on high-yield bond covenants. The final section presents analyzes high-yield price histories as a function of macroeconomic forces, impulse forces, risk, and technical features of the time series themselves.

About the Author

Martin S. Fridson, CFA
Martin S. Fridson CFA

Martin S. Fridson, CFA, is chief investment officer at Lehmann Livian Fridson Advisors LLC. Previously, he worked at Salomon Brothers, Morgan Stanley, and Merrill Lynch. Mr. Fridson has served as president of the Fixed Income Analysts Society, governor of CFA Institute, and director of the New York Society of Security Analysts. He has also served as special assistant to the director for deferred compensation in the Office of Management and Budget of the City of New York. Mr. Fridson is the author of several books, including Financial Statement Analysis and Unwarranted Intrusions: The Case against Government Intervention in the Marketplace. He holds a BA in history from Harvard College and an MBA from Harvard Business School.

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