Effect of Internal Liquidity on Corporate Bond Credit Spreads PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Effect of Internal Liquidity on Corporate Bond Credit Spreads PDF full book. Access full book title Effect of Internal Liquidity on Corporate Bond Credit Spreads by 蔡佩伶. Download full books in PDF and EPUB format.
Author: 蔡佩伶
Publisher:
ISBN:
Category :
Languages : en
Pages : 102
Get Book Here
Book Description
Author: 蔡佩伶
Publisher:
ISBN:
Category :
Languages : en
Pages : 102
Get Book Here
Book Description
Author: Hsien-Hsing Liao
Publisher:
ISBN:
Category :
Languages : en
Pages : 64
Get Book Here
Book Description
The recent global financial crisis reveals the important role of internal liquidity risk in corporate credit risk. However, hardly have any existing studies investigated its effects on bond yield spreads. This study employs both bond- and market-level data to address the issue. Bond-level results show that corporate internal liquidity volatility significantly impacts bond yield spreads when controlling for well-known variables, traditional accounting measures of corporate debt servicing ability and an additional structural form credit risk measure (the cash flow volatility). Further, this study finds that a systematic internal liquidity risk factor can materially capture market-wide bond yield spread changes. Market-level results also show that market-level internal liquidity risk significantly explains the spreads of bond indexes when controlling for factors of bond and equity markets and other major macro state variables. We conclude that internal liquidity risk should be incorporated into bond yield spread modeling.
Author: Jean Helwege
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
Get Book Here
Book Description
Corporate bond spreads are affected by both credit risk and liquidity and it is difficult to disentangle the two factors empirically. In this paper we separate out the credit risk component by examining bonds that are issued by the same firm and that trade on the same day. Our sample of bond pairs provides two yield spreads which, if they differ, vary only because of differences in liquidity. We then investigate the determinants of the differences in yield spreads. We find that standard liquidity measures do a poor job of explaining spreads, and that incorporating the information from other bonds issued by the firm and from bonds of other firms can significantly improve the explanatory power of those liquidity measures. Still, a significant portion of the spread is left unexplained and it is largely driven by a common unknown factor. We conclude that good proxies for the liquidity component of corporate bond spreads remain elusive.
Author: Henry Hongren Huang
Publisher:
ISBN:
Category :
Languages : en
Pages : 57
Get Book Here
Book Description
We examine the impact of individual stock liquidity on corporate bond yield spreads in the U.S. market. By extending the endogenous-default model to include stock liquidity in the calculation of the bond value we show that a drop in stock liquidity will increase the firm's credit risk by increasing the firm's default boundary, leading to an increase of the credit spread. Our model is consistent with the sharp increase of credit risk premiums and the “yield spread spike” phenomenon in corporate bond markets during the financial crisis. We present empirical evidence supportive of our model.
Author: Song Han
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
Get Book Here
Book Description
We examine the relationship between the nondefault component of corporate bond spreads and bond liquidity measures constructed from intraday transactions data, with the default component controlled by the term structure of credit default swaps (CDS) spreads. In doing so, we address both maturity mismatch and coupon effects in the nondefault spreads estimation, and explicitly control for the unobservable firm heterogeneity to identify the liquidity effects through variations both over time and across bonds issued by the same firm. We find a clear positive significant relationship between bond illiquidity and nondefault bond spreads. These liquidity effects identify a unique component of nondefault bond spreads that is uncorrelated with conventional liquidity proxy variables, particularly for higher-rated investment-grade bonds. Furthermore, nondefault bond spreads are relatively high at the short end of the maturity and increase with bond age. The effects of transaction-based bond liquidity measures are robust to alternative model specifications and samplings, and to whether swap or Treasury yield is used as risk-free rate.
Author: Biao Guo
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
Get Book Here
Book Description
This paper studies the macroeconomic determinants of the term structures of Treasury yields, corporate bond credit spreads, and corporate bond liquidity spreads in a unified no-arbitrage framework. Four economic factors, monetary conditions, inflation, real output, and financial market volatility, are extracted from a set of macroeconomic and financial data series. During the pre-crisis period, volatility shocks decrease Treasury yields and widen both credit spreads and liquidity spreads for all rating classes, and credit spreads widen as monetary conditions tighten, but the effects of inflation and real output are insignificant. In times of stress, financial market volatility has a similar impact and the impacts of inflation and real output become significant as well. Ignoring the liquidity component of corporate yield spreads is shown to lead to inaccurate estimation of the impacts of economic factors on corporate credit spreads. The paper also provides evidence of ”flight-to-liquidity” behavior which strengthens in bad times and sheds light on the negative correlation between the risk-free rate and corporate yield spreads as well as on the positive correlation between credit spreads and liquidity spreads.
Author: Delong Li
Publisher: International Monetary Fund
ISBN: 1513573411
Category : Business & Economics
Languages : en
Pages : 51
Get Book Here
Book Description
We analyze the long-run impact of emerging-market sovereign bond yields on corporate bond yields, finding that the average pass-through is around one. The pass-through is larger in countries with greater sovereign risks and where sovereign bonds are more liquid. It is also greater for corporate bonds with lower ratings, shorter maturities, and for those issued by financial companies and government-related firms. Our results support theoretical arguments that corporate and sovereign yields are linked together through credit risks and liquidity premiums. Consequently, high sovereign risks may slowdown growth by persistently increasing private sector borrowing costs.
Author: Joel Hasbrouck
Publisher: Oxford University Press
ISBN: 0198041306
Category : Business & Economics
Languages : en
Pages : 209
Get Book Here
Book Description
The interactions that occur in securities markets are among the fastest, most information intensive, and most highly strategic of all economic phenomena. This book is about the institutions that have evolved to handle our trading needs, the economic forces that guide our strategies, and statistical methods of using and interpreting the vast amount of information that these markets produce. The book includes numerous exercises.
Author: Sergei Ivanovich Tishchenko
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages :
Get Book Here
Book Description
Abstract: Corporate bond bid-ask spreads explain 40 percent of the temporal variation in yield spreads when daily individual bond data are used. Other known yield spread determinants such as the level and slope of the treasury yield curve, aggregate equity returns and implied volatility jointly explain only 10 percent of the yield spread variation. On average, approximately 60 percent of the bid-ask spread is impounded in the corporate yield spread. The estimates of the yield spread sensitivity to bid-ask spread changes are remarkably stable across bonds with different Standard & Poor's credit grades ranging from AAA to CC. This evidence supports the view that corporate bond liquidity is an important yield spread determinant.
Author: Stephanie Heck
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
Get Book Here
Book Description
Liquidity level and liquidity risk are priced in the cross-section of corporate bond yields and returns. In the first case the focus is on the individual liquidity level while in the second case it is on the exposure to a common liquidity factor. In this paper we focus on the impact of the liquidity level on yield spreads by acknowledging that liquidity is a latent variable with an important fraction of commonality. We first document the extent of this commonality in the US corporate bond market. Second we assess whether the relation to yield spreads is driven by this commonality or by the remaining idiosyncratic part. We find that a large fraction of the liquidity effect in fact stems from liquidity commonality. The impact of the bond-specific idiosyncratic liquidity level is minor overall, but increases in the post-crisis period and for some bond categories.
