Research Paper Discussion | Corporate Debt Pricing and the Determinants of Credit Risk
Join us in our monthly Zoom webinar series – “Research Paper Discussion”, where we’ll dissect influential research papers on capital markets!
For our next Research Paper Discussion, we are pairing two highly related landmark papers to spark an engaging debate:
- On the Pricing of Corporate Debt: The Risk Structure of Interest Rates (Merton, 1974).
- The Determinants of Credit Spread Changes (Collin-Dufresne et al., 2000).
About the Papers:
-
On the Pricing of Corporate Debt: The Risk Structure of Interest Rates Author: Robert C. Merton (1974).
The Paradigm Shift: This is the birth of structural credit risk modeling (the “Merton Model”). Before this, credit risk was largely assessed via accounting ratios (like Altman’s Z-score). Merton revolutionized the field by demonstrating that a company’s equity can be modeled as a European call option on the firm’s assets.
Core Insight: If the value of a firm’s assets falls below its debt obligations at maturity, the equity holders will let the “option” expire worthless (i.e., default). This allowed for the mathematical pricing of default risk using options pricing theory. -
The Determinants of Credit Spread Changes Authors: Pierre Collin-Dufresne, Robert S. Goldstein, and J. Spencer Martin (2001).
The Merton (1974) model dictates that a corporate bond’s credit spread should be driven by firm leverage, asset volatility, and the risk-free rate. This 2001 paper empirically tested that exact theory in the real world.
The authors found an anomaly: the variables predicted by the Merton model explain only about 25% of the actual changes in corporate credit spreads. The remaining 75% is driven by a mysterious, aggregate common factor (largely linked to market-wide liquidity and supply/demand shocks), giving birth to the famous “Credit Spread Puzzle.”
Event Details:
Date: 16th August 2026
Time: 3:00 PM Onwards
Platform: Zoom (Link will be shared after registration)
It’ll be an open discussion, moderated by CFA Society India volunteers.
We kindly request that you read the paper before joining the call
Click the link below to access the papers:
- On the Pricing of Corporate Debt: The Risk Structure of Interest Rates (Merton, 1974).
- The Determinants of Credit Spread Changes (Collin-Dufresne et al., 2000).
Registration Details:
CFA Society India Member: FREE
Kshitiz Jain, CFA, FRM
Co-Chair, Research Advocacy and Standards Committee | CFA Society India
Kshitiz Jain, CFA, FRM
Co-Chair, Research Advocacy and Standards Committee | CFA Society India
Kshitiz Jain is an accomplished Treasury and Investment leader with over 14 years of experience across banking, corporate treasury, and wealth management. He is currently working as Vice President at NIIF Infrastructure Finance Limited.
His previous roles include serving as Senior Vice President at Shriram Group, where he was leading the strategic setup of their Primary Dealership entity. He has also worked as Co-Founder and Head of Investment Strategy at CAGRfunds, where he scaled an institutional-grade equity advisory practice, and Senior Associate Director of Treasury at CTBC Bank, where he was instrumental in setting up the India Treasury business. He also spent nearly five years at ICICI Bank managing large-scale Indian Rates and G-sec desks.
He has a PGDM from IIM Bangalore and a B. Tech degree from IIT Roorkee. He is also a CFA Charter holder and Financial Risk Manager (FRM).
As a dedicated volunteer for CFA Society India, Kshitiz serves as Co-Chair of the Research and Advocacy Committee, where he regularly engages with regulators for policy advocacy. He is also the Deputy Director of the IIM Bangalore Alumni Association (Mumbai Chapter).
Kshitiz Jain, CFA, FRM
Co-Chair, Research Advocacy and Standards Committee | CFA Society India
Kshitiz Jain, CFA, FRM
Co-Chair, Research Advocacy and Standards Committee | CFA Society India
Kshitiz Jain is an accomplished Treasury and Investment leader with over 14 years of experience across banking, corporate treasury, and wealth management. He is currently working as Vice President at NIIF Infrastructure Finance Limited.
His previous roles include serving as Senior Vice President at Shriram Group, where he was leading the strategic setup of their Primary Dealership entity. He has also worked as Co-Founder and Head of Investment Strategy at CAGRfunds, where he scaled an institutional-grade equity advisory practice, and Senior Associate Director of Treasury at CTBC Bank, where he was instrumental in setting up the India Treasury business. He also spent nearly five years at ICICI Bank managing large-scale Indian Rates and G-sec desks.
He has a PGDM from IIM Bangalore and a B. Tech degree from IIT Roorkee. He is also a CFA Charter holder and Financial Risk Manager (FRM).
As a dedicated volunteer for CFA Society India, Kshitiz serves as Co-Chair of the Research and Advocacy Committee, where he regularly engages with regulators for policy advocacy. He is also the Deputy Director of the IIM Bangalore Alumni Association (Mumbai Chapter).