Comparison of Market and Credit Indicators of Default Probability of Corporations in the Russian Market

Student: Aliyev Mirzakishi

Supervisor: Mikhail Vyacheslavovich Pomazanov

Educational Programme: Financial Markets and Financial Institutions (Master)

Year of Graduation: 2021

The paper examines the relationship between the market and credit indicators of the probability of default(PD). For the purposes of the study, corporate bonds included in the Cbonds-CBI RU 1-3Y index were selected. The credit default probability indicator is based on the Central Bank's data on overdue accounts by type of economic activity. PD is calculated using the Hodrick-Prescott filter. And the spread is the difference between the yield of corporate bonds and Government bonds(OFZ) with the corresponding durations. The result of the analysis revealed a positive correlation between the spread and default. It is confirmed that the credit spread is a risk-determining indicator in the Russian corporate bond market. Keywords: G-curve; credit spread; default probabilities;

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