From the previous sections, we have learnt that the spread between a bond's yield and a treasury bond's yield with the same maturity is the default risk premium. To retrieve the yields for AAA and AA bonds, we use the following codes. Moody's Seasoned Aaa Corporate Bond Yield can be downloaded at https://fred.stlouisfed.org/series/AAA. The dataset can be downloaded at http://canisius.edu/~yany/python/moodyAAAyield.p. Note that the .png of .p is fine for the .pickle format:
import pandas as pd
x=pd.read_pickle("c:/temp/moodyAAAyield.p")
print(x.head())
print(x.tail())The output is shown here:
Note that the values of the second column, for the dataset called moodyAAAyield.p, are annualized. Thus, if we want to estimate a monthly yield (rate of return) in January 1919, the yield should be 0.4458333%, that is, 0.0535/12.
Altman's z-score is widely applied in finance for credit analysis to predict the possibility of a firm going to bankruptcy. This score is...