We investigate the empirical performance of default probability prediction based on Merton's (1974) structural credit risk model. More specifically, we study if distance-to-default is a sufficient statistic for the equity market information concerning the credit quality of the debt-issuing firm. We show that a simple reduced form model outperforms the Merton (1974) model for both in-sample fitting and out-of-sample predictability for credit ratings, and that both can be greatly improved by including the firm's equity value as an additional variable. Moreover, the empirical performance of this hybrid model is very similar to that of the simple reduced form model. As a result, we conclude that distant-to-default alone does not adequately capture the firm's credit quality information from ...
... return rather than the riskfree interest rates used in the option pricing formula for the pricing... are the one-year constant maturity T-bill rates observed at the end of each month. Alternati...), monthly one-year constant maturity treasury bill rates were used for the one-year risk-free in...
... The Economics of Future Currency Exchange Rates Discount Bonds: An Analogy Summary of the Economic... a Canadian taxpayer purchases a one-year treasury bill with a face value of $1,000 that pays 10% int...
We analyze the valuation effects of the Canadian federal government's announcement on November 23, 2005 of a reduction in the taxation of corporate dividends and the announcement on October 31, 2006 of a plan to eliminate the tax-deductibility of income trust distributions. Though high dividend stocks and income trusts reacted positively to the 2005 announcement, the abnormal returns were greater for income trusts. Conversely, both securities reacted negatively to the 2006 announcement with the decline bigger for income trusts. The larger price reactions of income trusts and the lack of statistical significance in the cross-sectional tests of the abnormal returns suggest that the popularity of income trusts in Canada was mostly driven by their favourable income tax status. The implicati...
... that retail investors with low marginal tax rates and tax exempt institutional investors tend to pre... income trust sector was valued at $160 billion. Beyond the income tax advantages, various non-tax...The stock data and the daily Treasury bill rates were taken from the Datastream database...
...The House of Assembly enacted the bill retroactive to March 31, 1991 as the Public Sector... rating had a positive effect on interest rates and lender confidence. The government was better a...
... the extent that the spouses' marginal tax rates differ. Advocates of splitting claim an inequity i... of the splitting proposal would be $2.7 billion for the federal government and an additional $1.7 ... cost--to $5.6 billion for the federal treasury and $3.5 billion for all the provincial government...
..., would have reached a staggering $12 billion in 2013, increasing to $27 billion in 2019. This b... transfers, and expected rising interest rates on the public debt. . The Quebec government reacte... percent of all program spending (Quebec Treasury Board 2010). Spending has also increased quickly d...
The purpose of a study is to examine a particular incarnation of taxation - the imperial stamp duty imposed by the British Parliament on the American colonies briefly from 1765 to 1766, the demise of which is referred to as the "Stamp Act crisis." The version of stamp duty imposed on the colonies bore strong resemblance to that in operation in Great Britain with some modifications to accommodate colonial conditions. By the middle of the 18th century, a stamp duty had become an accepted part of the tax landscape in Britain, and the administrative machinery by which it was collected was firmly established. In view of this, the vehement rejection of a similar impost by the colonists was not a response that was either anticipated or expected. The response by the colonists can, it is argued,...
..., Charles Jenkinson, Secretary to the Treasury, produced a paper entitled Observations on the Mon... up showing the current British heads and rates of duty side by side with the colonial duties [N.A...Work began on the stamp bill in 1763, with two draft versions submitted to the ...
... has been extra fiscal room totaling $34 billion, or an average of $6.8 billion annually. But this ... economic growth, tax yields, and interest rates vary from run to run--can help the government make... were estimated to "cost" the federal treasury. In the wake of an overrun on such a scale, it is ...
... northerners abuse alcohol at higher rates than their southern counterparts; however Indigeno...(39) From 1867 to 1899, the Treasury Department worked alternately with the Army and Na... and sale of alcohol in Alaska, (112) the bill having been introduced by Alaska's delegate to Con...
...Bill C-3 made substantial modifications to the procedur...[222] In Newfoundland (Treasury Board) v. N.A.P.E., 2004 SCC 66 at paras. 83-84, J... increased funding in excess of legal aid rates is dismissed. July 14, 2008*. Justice ...
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