Municipal Bond Liquidity and Default Risk
用三种互补方法分解市政债券利差，发现调整免税地位后违约风险占平均利差的74%到84%，违约风险定价偏高，隐含高风险溢价。
ABSTRACT This paper examines the pricing of municipal bonds. I use three distinct, complementary approaches to decompose municipal bond spreads into default and liquidity components, and find that default risk accounts for 74% to 84% of the average spread after adjusting for tax‐exempt status. The first approach estimates the liquidity component using transaction data, the second measures the default component with credit default swap data, and the third is a quasi‐natural experiment that estimates changes in default risk around pre‐refunding events. The price of default risk is high given the rare incidence of municipal default and implies a high risk premium.