We document the ability of the credit default swap (CDS) market to anticipate favorable as well as unfavorable credit rating change (RC) announcements based on more extensive samples of credit rating events and CDS spreads than previous studies. We obtain four new results. In contrast to prior...

This paper presents a flexible, lattice-based structural credit risk model that uses equity market information and a detailed depiction of a financial institution’s liability structure to analyze default risk. The model is applied to examine the term structure of default probabilities for...