English, Article, Journal or magazine article edition: Determinants of Euro Term Structure of Credit Spreads Astrid Van Landschoot

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Bookmark: http://trove.nla.gov.au/version/17746
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Determinants of euro term structure of credit spreads
Author
  • Astrid Van Landschoot
Physical Description
  • preprint
Notes
  • In this paper, we analyze wether the sensitivity of credit spread changes to financial and macroeconomic variables depends on bond characteristics such as rating and maturity. First, we estimate the term structure of credit spreads for different rating categories by applying an extension of the Nelson-Siegel method. Then, we analyse the determinants of credit spread changes. According to the structural models and empirical evidence on credit spreads, our results indicate that changes in the level and the slope of the default-free term structure, the market return, implied volatility, and liquidity risk significantly influence credit spread changes. The effect of these factors strongly depends on bond characteristics, especially the rating and to a lesser extent the maturity.
  • RePEc:nbb:reswpp:200407
  • In this paper, we investigate the determinants of the Euro term structure of credit spreads. More specifically, we analyze whether the sensitivity of credit spread changes to financial and macroeconomic variables depends on bond characteristics such as rating and maturity. According to the structural models and empirical evidence on credit spreads, we find that changes in the level and the slope of the default-free term structure, the market return, implied volatility, and liquidity risk significantly influence credit spread changes. The effect of these factors strongly depends on bond characteristics, especially the rating and to a lesser extent the maturity. Bonds with lower ratings are more affected by financial and macroeconomic news. Furthermore, we find that liquidity risk significantly increases credit spreads, especially on lower rated bonds.
  • Credit risk; Structural models; Nelson-Siegel.
  • RePEc:ecb:ecbwps:20040397
Language
  • English
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