I have often been asked what an increase in equity volatility means to corporate bonds, and the short answer is—it’s not a good thing.
For many years, equities and corporate debt traded in comparative isolation. However, this has changed for numerous reasons. The increased issuance of hybrid debt-equity instruments such as convertible bonds is one, as is the proliferation of hedge funds dedicated to trading that market. Another is the growing use of risk scoring models that use equity price vola