Download or read book Accounting Transparency and the Term Structure of Credit Spreads written by Fan Yu and published by . This book was released on 2005 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Theory predicts that the quality of a firm's information disclosure can affect the term structure of its corporate bond yield spreads. Using cross-sectional regression and Nelson-Siegel yield curve estimation, I find that firms with higher AIMR disclosure rankings tend to have lower credit spreads. Moreover, this ``transparency spread'' is especially large among short-term bonds. These findings are consistent with the theory of discretionary disclosure as well as the incomplete accounting information model of Duffie and Lando (2001). The presence of a sizable short-term transparency spread can attenuate some of the empirical problems associated with structural credit risk models.

Download or read book Accounting Transparency and the Term Structure of Credit Default Swap Spreads written by Claus Bajlum and published by . This book was released on 2007 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper estimates the impact of accounting transparency on the term structure of CDS spreads for a large cross-section of firms. Using a newly developed measure of accounting transparency in Berger, Chen & Li (2006), we find a downward-sloping term structure of transparency spreads. Estimating the gap between the high and low transparency credit curves at the 1, 3, 5, 7 and 10-year maturity, the transparency spread is insignificant in the long end but highly significant and robust at 20 bps at the 1-year maturity. Furthermore, the effect of accounting transparency on the term structure of CDS spreads is largest for the most risky firms. These results are strongly supportive of the model by Duffie & Lando (2001), and add an explanation to the underprediction of short-term credit spreads by traditional structural credit risk models.

Download or read book Accounting Transparency and the Term Structure of Credit Default Swap Spreads written by and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Macro Factors in the Term Structure of Credit Spreads written by Jeffery D. Amato and published by . This book was released on 2006 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate arbitrage-free term structure models of US Treasury yields and spreads on BBB and B rated corporate bonds in a doubly-stochastic intensity-based framework. A novel feature of our analysis is the inclusion of macroeconomic variables -- indicators of real activity, inflation and financial conditions -- as well as latent factors, as drivers of term structure dynamics. Our results point to three key roles played by macro factors in the term structure of spreads: they have a significant impact on the level, and particularly the slope, of the curves; they are largely responsible for variation in the prices of systematic risk; and speculative grade spreads exhibit greater sensitivity to macro shocks than high grade spreads. In addition to estimating risk-neutral default intensities, we provide estimates of physical default intensities using data on Moody's KMV EDFs as a forward--looking proxy for default risk. We find that the real and financial activity indicators, along with filtered estimates of the latent factors from our term structure model, explain a large portion of the variation in EDFs across time. Furthermore, measures of the price of default event risk implied by estimates of physical and risk-neutral intensities indicate that compensation for default event risk is countercyclical, varies widely across the cycle, and is higher on average and more variable for higher-rated bonds.

Download or read book The Term Structure of Credit Spreads in Project Finance written by Marco Sorge and published by . This book was released on 2004 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Term Structure of Credit Spreads and the Economic Activity written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate arbitrage-free term structure models of US Treasury yields and spreads on BBB and B-rated corporate bonds in a doubly- stochastic intensity-based framework. A novel feature of our analysis is the inclusion of macroeconomic variables - indicators of real activity, inflation and financial conditions - as well as latent factors, as drivers of term structure dynamics. Our results point to three key roles played by macro factors in the term structure of spreads: they have a significant impact on the level, and particularly the slope, of the curves; they are largely responsible for variation in the prices of systematic risk; and speculative grade spreads exhibit greater sensitivity to macro shocks than high grade spreads. In addition to estimating risk-neutral default intensities, we provide estimates of physical default intensities using data on Moody's KMV EDFs"!as a forward-looking proxy for default risk. We find that the real and financial activity indicators, along with filtered estimates of the latent factors from our term structure model, explain a large portion of the variation in EDFs"!across time. Furthermore, measures of the price of default event risk implied by estimates of physical and risk-neutral intensities indicate that compensation for default event risk is countercyclical, varies widely across the cycle, and is higher on average and more variable for higher- rated bonds.

Download or read book The Shape of the Term Structure of Credit Spreads written by Mascia Bedendo and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this empirical paper we investigate the role of interest rate, market and idiosyncratic equity variables in explaining the entire shape of the term structure of credit spreads. Recent empirical literature has highlighted the importance of these components as determinants of the credit spread levels. By analyzing portfolios of straight bonds for both the industrial and financial sectors across investment grade credit ratings, we find that these factors impact credit spread levels at various maturities in a significantly different way. Therefore we conclude that these variables represent important determinants not only of the level, but also of the slope and curvature of credit spread term structures. A closer inspection of the credit spread slope also reveals that it contains important information about future credit spreads, and provides useful insights into the theoretical predictions of the Merton (1974) model.

Download or read book A No Arbitrage Analysis of Economic Determinants of the Credit Spread Term Structure written by Liuren Wu and published by . This book was released on 2008 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents an internally consistent analysis of the economic determinants of the term structure of credit spreads across different credit rating classes and industry sectors. Our analysis proceeds in two steps. First, we extract three economic factors from 13 time series that capture three major dimensions of the economy: inflation pressure, real output growth, and financial market volatility. In the second step, we build a no-arbitrage model that links the dynamics and market prices of these fundamental sources of economic risks to the term structure of Treasury yields and corporate bond credit spreads. Via model estimation, we infer the market pricing of these economic factors and their impacts on the whole term structure of Treasury yields and credit spreads.Estimation shows that positive inflation shocks increase both Treasury yields and credit spreads across all maturities and credit rating classes. Positive shocks on the real output growth also increase the Treasury yields, more so at short maturities than at long maturities. The impacts on the credit spreads are positive for high credit rating classes, but become negative and increasingly so at lower credit rating classes. The financial market volatility factor has small positive impacts on the Treasury yield curve, but the impacts are strongly positive on the credit spreads, and increasingly so at longer maturities and lower credit rating classes.Finally, when we divide each rating class into two industry sectors: financial and corporate, we find that with in each rating class, the credit spreads in the financial sector are on average wider and more volatile than the spreads in the corporate sector. Estimation further shows that the term structure of credit spreads in the financial sector is more responsive to shocks in the economic factors.

Download or read book The Term Structure of Credit Spreads and the Cross Section of Stock Returns written by Bing Han and published by . This book was released on 2016 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the link between credit and equity markets by considering the informational content of the term structure of credit spreads. A shallower credit term structure predicts decreases in default risk, increases in future profitability, as well as favorable earnings surprises. Further, the slope of the credit term structure negatively predicts future stock returns. While systematic slope risk is also priced, information diffusion from the credit market to equities, particularly in less visible stocks, plays an additional role in accounting for return predictability from credit slopes: Such predictability is less evident in stocks with high institutional ownership, analyst coverage, and liquidity, and vice versa.

Download or read book Term Structures of Credit Spreads with Incomplete Accounting Information written by D. Duffie and published by . This book was released on 1999 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Shape of the Term Structure of Credit Spreads written by and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Term Structures of Credit Spreads with Incomplete Accounting Information D Duffie and D Lando written by Darrell Duffie and published by . This book was released on 1999 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Estimating the Term Structure of Credit Spreads written by Antje Berndt and published by . This book was released on 2003 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A No arbitrage Analysis of Economic Determinants of the Credit Spread Term Structure written by Liuren Wu and published by . This book was released on 2005 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Term Structure of Credit Spreads and Credit Default Swaps An Empirical Investigation written by Stefan Trück and published by . This book was released on 2014 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the term structure of credit spreads and credit default swaps for different rating categories. It is well-known quite that for issuers with lower credit quality higher spreads can be observed in the market and vice versa. However, empirical results on spreads for bonds with the same rating but different maturities are rather controversial. We provide empirical results on the term structure of credit spreads based on a large sample of Eurobonds and domestic bonds from EWU-countries. Further we investigate maturity effects on credit default swaps and compare the results to those of corporate bonds. We find that for both instruments a positive relationship between maturity and spreads could be observed for investment grade debt. For speculative grade debt the results are rather ambiguous. We also find that spreads for the same rating class and same maturity exhibit very high variation.

Download or read book Exploring Common Factors in the Term Structure of Credit Spreads written by Seung C. Ahn and published by . This book was released on 2012 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a new approach to model the common variation in the term structure of credit spreads. The novelty is that common factors are extracted using canonical relations between credit spreads and observable economic variables. We show how these factors can be used to test if a given set of macroeconomic and financial variables is sufficient to capture all the systematic variation in response variables, such as credit spreads. We find that credit spread innovations are subject to three common factors, two strong factors and one weak factor, and they account for 49% of the total variation. The first strong factor is related to the contemporaneous state of the economy, the second represents expectations about future economic conditions, and the weak factor is mainly related to the error correction processes in short-term spreads.

Download or read book Commonalities in the Term Structure of Credit Spreads written by Abhimanyu Chatterjee and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: