Replication data for: Option-Based Credit Spreads

Pietro Veronesi, Yoshio Nozawa & Christopher L. Culp
We present a novel empirical benchmark for analyzing credit risk using \"pseudo firms\" that purchase traded assets financed with equity and zero-coupon bonds. By no-arbitrage, pseudo bonds are equivalent to Treasuries minus put options on pseudo firm assets. Empirically, like corporate spreads, pseudo bond spreads are large, countercyclical, and predict lower economic growth. Using this framework, we find that bond market illiquidity, investors' overestimation of default risks, and corporate frictions do not seem to explain...
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