Financial Consultant and Visiting FacultyIndian Institute of Management Calcutta, India
As financial intermediaries create and hold financial assets, they search for a variety of ways to refinance them. Corporate bonds are the most traditional form of capital market-based refinancing. However, corporate bonds are a direct exposure on the issuer and are directly affected by the financial strength of the issuer. The issuer’s rating determines the rating of corporate bonds. Obviously, over a period of time till maturity, these bonds are affected by the changes in the rating of the issuer, as also is the probability of default.
A country’s financial system may, for a variety of reasons, want financial ...