Download or read book The Term Structure of Credit Spreads on Euro Corporate Bonds written by Astrid Van Landschoot and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Term Structure of Credit Spreads written by Ombretta Terazzan and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Determinants of Credit Spreads written by Arne Wilkes and published by Peter Lang Gmbh, Internationaler Verlag Der Wissenschaften. This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit spreads express how markets evaluate the riskiness of corporate bonds compared to risk-free investments. Since credit spreads have been highly volatile especially during the last decade it is important for academics and practitioners alike to understand the dynamic interdependencies between credit spreads and their determinants. Based on a sample of European corporate bonds and different macroeconomic variables the author analyzes the determinants of credit spreads during the period of 1999 to 2009. With a macro-finance term structure model he shows that the European corporate bond market is largely integrated with some remaining segmentation. Furthermore, panel regressions yield that declining liquidity leads to a significant widening of credit spreads especially during the recent financial crisis. Finally, he demonstrates based on a cointegration analysis that a long-term relationship exists between credit spreads and their determinants and that credit spreads were significantly overpriced after the collapse of Lehman Brothers but have almost returned to equilibrium towards the end of 2009.
Download or read book Credit Spreads on Sterling Corporate Bonds and the Term Structure of UK Interest Rates written by Jeremy Leake and published by . This book was released on 2005 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores the relationship between credit spreads on sterling corporate bonds and the term structure of UK interest rates. In particular, it examines whether credit spreads are a reliable indicator of corporate bond default risk. Using daily price quotes from 1990 to 1998, the paper finds a small negative relationship between credit spreads on sterling investment-grade corporate bonds and the level and slope of the term structure of UK interest rates. The results are weaker than those found by Longstaff and Schwartz (1995) and Duffee (1996 and 1998) who both examine the relationship between US corporate bond credit spreads and the term structure of US interest rates. The weak relationship found suggests that credit spreads on sterling investment-grade corporate bonds have been driven by factors other than default risk. If so, we should be cautious in interpreting such credit spreads as measures of bond default risk. This result is important to both those in the field of financial stability interested in leading indicators of corporate defaults, and to monetary policy makers interested in the impact of interest rate changes on corporate bond default risk. Similar work should be repeated for sterling sub investment-grade corporate bonds once a sufficiently large data set can be assembled.
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 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 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 Corporate Bond Yield Spreads and the Term Structure written by Ronald W. Anderson and published by . This book was released on 1997 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 Determinants of Yield Spread Dynamics written by Astrid Van Landschoot and published by . This book was released on 2009 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a systematic comparison between the determinants of euro and US dollar yield spread dynamics. The results show that US dollar yield spreads are significantly more affected by changes in the level and the slope of the default-free term structure and the stock market return and volatility. Surprisingly, euro yield spreads are strongly affected by the US (and not the euro) level and slope. This confirms the dominance of US interest rates in the corporate bond markets. Interestingly, I find that liquidity risk is higher for US dollar corporate bonds than euro corporate bonds. For both regions, the effect of changes in the bid-ask spread is mainly significant during periods of high liquidity risk. Finally, the results indicate that the credit cycle as measured by the region-specific default probability significantly increases US yield spreads. This is not the case for euro yield spreads.
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 Handbook of European Fixed Income Securities written by Frank J. Fabozzi and published by John Wiley & Sons. This book was released on 2004-02-03 with total page 1026 pages. Available in PDF, EPUB and Kindle. Book excerpt: A well-rounded guide for those interested in European financial markets With the advent of the euro and formation of the European Union, financial markets on this continent are slowly beginning to gain momentum. Individuals searching for information on these markets have come up empty-until now. The Handbook of European Fixed Income Markets is the first book written on this burgeoning market. It contains extensive, in-depth coverage of every aspect of the current European fixed income markets and their derivatives. This comprehensive resource includes both a qualitative approach to products, conventions, and institutions as well as quantitative coverage of valuation and analysis of each instrument. The Handbook of European Fixed Income Markets introduces readers to developed markets such as the U.K., France, Germany, Italy, Spain, and Holland, as well as emerging markets in Eastern Europe. Government and corporate bond market instruments and institutions are also discussed. U.S.-based investors, researchers, and academics as well as students and financial professionals in other parts of the world will all turn to this book for complete and accurate information on European financial instruments and markets. Frank J. Fabozzi (New Hope, PA) is a financial consultant, the Editor of the Journal of Portfolio Management, and Adjunct Professor of Finance at Yale University's School of Management. Moorad Choudhry (Surrey, UK) is a Vice President with JPMorgan Chase structured finances services in London.
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 Credit Spreads and the Treasury Zero Coupon Spot Curve written by Nicolas A. Papageorgiou and published by . This book was released on 2011 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the relation between credit spreads on industrial bonds and the underlying Treasury term structure. We use zero-coupon spot rates to eliminate the coupon bias and allow for a consistent study both within and across the different credit ratings. Our results indicate that the level and slope of the Treasury term structure are negatively correlated with changes in the credit spread on investment grade corporate bonds. We also find that the relation between credit spreads and the Treasury term structure is relatively stable through time. This is good news for value-at-risk calculations as this suggests that the correlations amongst assets of different credit classes are stable; therefore use of historic correlations to model spread relations can be valid.
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 Estimating the systematic component of credit spreads written by Sebastian Wilde and published by GRIN Verlag. This book was released on 2022-08-31 with total page 79 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2022 in the subject Economics - Finance, grade: 1,7, University of Hagen (Fakultät für Wirtschaftswissenschaft, Lehrstuhl für Bank- und Finanzwirtschaft), language: English, abstract: Corporate bond credit spreads are much larger than historical default rates, which leads to an unexplained gap between the default premium component and total credit spread. This gap is referred to as the "credit spread puzzle" in the literature and has driven the discussion of the components of credit spreads in the past decades. The size of each component affects the decision of whether to purchase a particular class of bonds; this underlines its importance in risk management, portfolio management, and valuation. The first goal of the thesis is to provide a comprehensive review of the current state of research on how to decompose credit spreads and estimate their parts. Second, in an empirical study, the systematic risk in current EUR-denominated credit spreads is estimated and compared to the results of Elton et al. (2001). Furthermore, I analyze the regime-dependence of credit spreads for different cross-sections, as systematic risk has proven important in crisis periods. Finally, implications for the calculation of debt beta are derived as in business valuations it is possible to use a debt beta if the debt of the valuation object is subject to a systematic risk that leads to a signifcant risk premium demanded by debt providers. I show that the systematic part of the credit spread for observed EUR-denominated bond spreads from 2009 to 2021 can be assumed higher than in the US bond market, is regime-dependent and would have direct implications on the calculation and relevance of a debt beta for business valuations.
Download or read book Currency Dependence of Corporate Credit Spreads written by Rainer Jankowitsch and published by . This book was released on 2003 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many pricing and risk management models need credit spread curves as an input. In the corporate bond market the estimation of credit spread curves is not trivial. Most issuers have only too few bonds outstanding and frequently these bonds are denominated in different currencies. To ensure a sufficient number of bonds for the estimation procedure in many cases bonds in different currencies have to be used which implies that the estimation procedure has to take into account potential currency effects. Under the hypothesis of zero correlation between the default variables and the exchange rates deflated by the relevant money market accounts we show using a rather general pricing framework that credit spreads are expected to be equal across different currencies. This paper analyses these effects and presents a new model which allows to estimate a credit spread curve for a single issuer with bonds in different currencies. This new model is based on the multi-curve estimation approach which allows a parsimonious joint estimation of a risk free term structure and the credit spread curve of the issuer. We reject the hypothesis of zero correlation between credit and exchange rate risk and present empirical evidence that there are significant differences of issuer specific credit spreads across different currencies in a representative sample of international corporate bonds. Moreover, this implies that dollar related credit spread curves cannot be used without special care for pricing defaultable claims denominated in other currencies.
