Real-world credit calibration. Credit spread targets and ESG output at end Dec 2008
Document ID: 2009-1302
Published on: 25th March 2009
Author: Ruosha Li & Michelle Barbour
There is little corporate bond spread and returns data available making it difficult to make sensible assumptions about their unconditional (long-term) distribution. To calibrate the credit model in our ESG models, we are left some difficult choices – for instance, is the distribution of the limited data we have available representative for the unconditional distribution of credit spreads? Should we target corporate spreads or returns?
