7. 5-6
Increase in Default Risk
on Corporate Bonds
1. Risk of corp. bonds ↑, Dc
↓, Dc
shifts
2. Excess Supply⇒ Pc
↓, ic
↑
1. Relative risk of T bonds ↓,
DT
↑, DT
shifts right
2. Excess Demand⇒ PT
↑, iT
↓
http://www.investopedia.com/terms/f/flighttoquality.