Introduction. In contrast to the markets of developed countries, forming characteristic risk premium investment bonds in emerging markets, is that the greatest effect on the risk premium on bonds in countries such factor provides market liquidity in general and specific securities in particular. The second most significant factor influencing the risk premium is the risk of changing interest rates. The risk of default of issuers in such countries is also quite high, but the component of creditworthiness is less significant factor in the combination of systematic risks. Due to low sovereign ratings of Ukraine, the credit ratings of bonds of all domestic issuers have a speculative level. Owing to this fact, all of them can be classified as highly risky and, accordingly, highly profitable (HighYield Bonds).
Purpose. The aim of the article is to reduce deficits in the scientific and methodological provision of the use of corporate bonds instruments on the basis of determining the determinants of the premium for the risk of investing in them.
Method (methodology). To achieve the goal and solve the problems, the following methods have been used: method of analysis and synthesis, method of comparison and generalization; method of empirical research and factor analysis; method of system approach and strategy.
Results. The research of the determinants of the risk premium is important, first of all, from the point of view of substantiating the technologies of reducing the cost of enterprises to capital. The key causes of underdevelopment of the domestic corporate bond market have been determined. We have identified factors that influence the spread of profitability and the value of bonds. They are the risk of default of the issuer and the potential of the enterprise development (credit component); base interest rate and long-term interest rates on the financial market (interest rate component); liquidity of the capital market (component of liquidity); the level of inflation and the development of economic conditions; information risks. It has been determined that in order to reduce the risk of investments in corporate bonds, it is necessary to implement at the regulatory level a set of measures to reduce overhead costs and increase the reliability of investments. The introduction of a safety covenant system can be defrined as one of such measures.
Secondary Market Liquidity and Security Design: Theory and Evidence from ABS Markets