I am looking for a comprehensive ressource describing known strategies of credit risk premia. Is there such kind of articles/books/websites?


1 Answer 1


Two papers by AQR might be of use:

Asvanunt, A. and S. Richardson (2016), “The Credit Risk Premium”:

Despite theoretical and intuitive reasons for a credit risk premium, past research has found little supporting empirical evidence. This is primarily due to biases in computing credit excess returns which improperly account for term risk. Using data spanning 80 years in the U.S., and nearly 20 years in Europe, we find strong evidence of credit risk premium after correctly adjusting for term risk. The credit risk premium is not spanned by other known risk premia and exhibits time variation related to economic growth and aggregate default rates. These results have important implications for asset pricing and investment decisions.

Asvanunt, A., Frieda, A., and S. Richardson, “Systematic Credit Investing”:

This paper aims to increase familiarity of the credit asset class and provide an overview of our approach to systematic credit investing. We introduce credit instruments and outline a simple framework for understanding sources of credit excess returns. We summarize two avenues for approaching systematic credit investing (and provide many references for readers interested in greater depth): (i) strategic and tactical exposure to the overall credit risk premium and (ii) relative value opportunities across credit instruments. We find that both kinds of systematic credit exposure have the potential to provide meaningful performance and diversification benefits to traditional and alternative portfolios.

Also take a look at Van Luu, B. and P. Yu (2011). The credit risk premium: should investors overweight credit, when, and by how much?:

The authors revisit the case for maintaining a strategic overweight to corporate bonds in fixed income portfolios based on the notion of the credit risk premium. Using a series of excess returns to investment-grade corporate bonds going back to 1926, the authors find evidence of a positive risk premium of corporate bonds over Treasuries. However, investors who rely on a passive structural overweight should be aware of the substantial additional tracking error and the long payoff periods required. Second, they examine the behavior of credit excess returns through many cycles, using the OECD Composite Leading Index to divide economic activity into four re-occurring phases. At the margin, the results are useful in guiding portfolio managers and asset owners in their tactical decisions with regard to the magnitude of the credit tilt.


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