A quantitative approach to forecast US high yield corporate bonds default rates

Abstract

The main ambition of this work is to present the current dynamics of the US high yield corporate bond market, providing readers with a detailed analysis of the historical evolution of the market and the potential future developments. Primary emphasis is placed on understanding the default rate of the US high yield corporate bond market and the relative underlying drivers, with the ambition to build an effective and efficient quantitative model to forecast its evolution in the short run. A comparative analysis of the estimates obtained through the application of a panel of different econometric models is left as conclusion. Considering the growing interest demonstrated by investors towards the high yield corporate bond market, the thesis strives to contribute to the increasing literature in this field by presenting a new and original approach to model the default rates.