Relationship between default risk and value of bond
[...] underestimating the risk of default is tantamount to overestimating the value of the bond.


The reason behind this is simply due to how bonds are priced.

$$
P = \sum_{n=1}^N \frac{C + M[{I_{n=N}}]}{(1+i)^n}
$$

Where $i$ is the contractual interest rate, $C$ is the coupon payment, $N$ is the number of payments, $I_{n=N}$ is an indicator function taking the value of $1$ when $n=N$ is $true$ or $0$ otherwise, $P$ is the market price of the bond, $M$ is the value of the bond at maturity.

When $i$ goes up, $P$ goes down and vice versa, see



$\rightarrow$ if $i$ is underestimated, $P$ will be overestimated. Indeed, it is $i$ which, via a premium, internalizes the default risk consideration and is an increasing quantity of it.