An amount added to a risk free bond to compensate investors for assuming the risk of default. A default premium is often paid by entities with poor credit histories as they are more likely to default on its loans. As it is with companies with high debt-to-income ratios, default premiums are added in order to entice lenders into purchasing their bonds. Thus, the risk borne by the investors is compensated by the bond's higher yield.
Related information about default premium:
- Default Premium Definition | Investopedia
The additional amount a borrower must pay to compensate the lender for assuming default risk. A default premium is generally paid by all companies or ...
- Default Premium - Financial Dictionary - The Free Dictionary
A differential in promised yield that compensates the investor for the risk inherent in purchasing a corporate bond that entails some risk of default. Often the ...
- What is default premium? definition and meaning
Definition of default premium: An amount added to a risk free bond to compensate investors for assuming the risk of default. A default premium is often paid by ...
- Fiscal Rules and the Sovereign Default Premium; by Juan Carlos - IMF
Fiscal Rules and the Sovereign Default Premium. Juan Carlos Hatchondo, Leonardo Martinez, and Francisco Roch. WP/12/30 ...
- Ibbotson's Default Premium: Risky Data by Winfried Hallerbach ...
Jul 29, 2011 ... Ibbotson's “Stocks, Bonds, Bills and Inflation” data set is widely used because it provides monthly US financial data series going back to as ...
- Gauging the Default Premium - JStor
by Gordon Pye. Gauging the Default Premium. The yield calculated on the market price of a bond has sometimes been called its promised return.
- Fiscal Rules and the Sovereign Default Premium - Working Paper ...
We find the optimal target values for fiscal rules and measure their aggregate effects using a model of sovereign default. We calibrate the model to an economy ...
- What Is a Default Premium?
The default premium is a financial tool that is sometimes used by lenders to help minimize the degree of risk associated with extending loans and other forms of ...