No. of Recommendations: 0
Charlie, why don't you include the risk of default in your "ADJ" column?  

If you believe the numbers in the chart below it would seem that
for any Corp rated S&P BBB or below you would want to factor it
in explicitly.  

You've been very rigorous in your treatment of inflation and I 
would be interested in how you view default risk mathematically.

Cumulative Historic Default Rates (in percent)
                       Moody’s             S&P
Rating category     Muni     Corp     Muni     Corp
Aaa/AAA             0.00     0.52     0.00     0.60
Aa/AA               0.06     0.52     0.00     1.50
A/A                 0.03     1.29     0.23     2.91
Baa/BBB             0.13     4.64     0.32    10.29
Ba/BB               2.65    19.12     1.74    29.93
B/B                11.86    43.34     8.48    53.72
Caa-C/CCC-C        16.58    69.18    44.81    69.19
Investment grade    0.07     2.09     0.20     4.14
Non-invest grade    4.29    31.37     7.37    42.35
All                 0.10     9.70     0.29    12.98

Source: U.S. Municipal Bond Fairness Act, 2008.
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.