Variations in Credit Spread Term Structures
This paper examines the slope and structure of credit spread curves across different ratings. We initially bootstrap a separate risky spot curve for each firm in the sample and then provide a parsimonious method to determine the shapes of the various credit spread curves. This procedure is more scie...
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| Main Authors: | , , |
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| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2013
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| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/3588 https://www.academicstar.us/issueshow.asp?daid=691 |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | This paper examines the slope and structure of credit spread curves across different ratings. We initially bootstrap a separate risky spot curve for each firm in the sample and then provide a parsimonious method to determine the shapes of the various credit spread curves. This procedure is more scientific and efficient than the visual observation employed traditionally. We find that credit spread curves of the various-graded bonds are much more variant and do not necessarily follow the few patterns prescribed by existing research. However, we can still see clearly that they are downward sloping when bonds are close to default. |
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