Valuation of corporate bonds (Prof. Aussenegg)
The research project aims to develop a new valuation model for European corporate bonds. It is being carried out in cooperation with the University of Birmingham (UK). Corporate bonds have become increasingly important as a financing instrument in recent years. First results show that a new set of altogether five factors represents a strongly improved alternative to the classical 2-factor model. These are (i) the mapping of the dynamics of the overall interest rate risk structure (2 factors), (ii) the mapping of the dynamics of the overall credit risk structure (2 factors) and (iii) the mapping of liquidity effects (1 factor). Valuation models for corporate bonds are important, among other things, for measuring the cost of capital as well as the valuation of new issues.