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ERIC Number: EJ911141
Record Type: Journal
Publication Date: 2011
Pages: 8
Abstractor: As Provided
Reference Count: 8
ISSN: ISSN-0022-0485
Understanding Credit Risk: A Classroom Experiment
Servatka, Maros; Theocharides, George
Journal of Economic Education, v42 n1 p79-86 2011
This classroom experiment introduces students to the notion of credit risk and expected return, by allowing them to trade on comparable corporate bond issues from two types of markets: investment-grade and high-yield markets. Investment-grade issues have a lower probability of default than high-yield issues and thus provide a lower yield. Participants can earn money in three ways: from coupon payments, from the face value of the bond, and by capital gains. While participating in an experiment, students learn about the notion of risk and return, how credit risk affects bond prices, the movement of bond prices through time, and other general characteristics of the bond markets. (Contains 1 table and 6 notes.)
Routledge. Available from: Taylor & Francis, Ltd. 325 Chestnut Street Suite 800, Philadelphia, PA 19106. Tel: 800-354-1420; Fax: 215-625-2940; Web site:
Publication Type: Journal Articles; Reports - Descriptive
Education Level: Higher Education; Postsecondary Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A