The Term Structure of Credit Spreads in Project Finance PDF Download
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Author: Marco Sorge
Publisher:
ISBN:
Category : Credit
Languages : en
Pages : 72
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Book Description
Author: Marco Sorge
Publisher:
ISBN:
Category : Credit
Languages : en
Pages : 72
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Book Description
Author: Mascia Bedendo
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
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.
Author: Jeffery D. Amato
Publisher:
ISBN:
Category : Corporate bonds
Languages : en
Pages : 72
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Book Description
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.
Author: Stefan Trück
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
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.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
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.
Author: Antje Berndt
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Author: Varqá Khadem
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Hui Chen
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 0
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Book Description
Abstract: We build a dynamic capital structure model to study the link between firms' systematic risk exposures and their time-varying debt maturity choices, as well as its implications for the term structure of credit spreads. Compared to short-term debt, long-term debt helps reduce rollover risks, but its illiquidity raises the costs of financing. With both default risk and liquidity costs changing over the business cycle, our calibrated model implies that debt maturity is pro-cyclical, firms with high systematic risk favor longer debt maturity, and that these firms will have more stable maturity structures over the cycle. Moreover, pro-cyclical maturity variation can significantly amplify the impact of aggregate shocks on the term structure of credit spreads, especially for firms with high beta, high leverage, or a lumpy maturity structure. We provide empirical evidence for the model predictions on both debt maturity and credit spreads
Author:
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages :
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Author: Luca Benzoni
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We propose a tractable model of a firm's dynamic debt and equity issuance policies in the presence of asymmetric information. Because "investment-grade" firms can access debt markets, managers who observe a bad private signal can both conceal this information and shield shareholders from infusing capital into the firm by issuing new debt to service existing debt, thus avoiding default. The implication is that the "asymmetric information channel" can generate jumps to default (from the creditors' perspective) only for those "high-yield" firms that have exhausted their ability to borrow. Thus, our model deepens the "credit spread puzzle" for investment-grade firms.
