Term Structures of Credit Spreads with Incomplete Accounting Information D. Duffie and D. Lando PDF Download
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Author: Darrell Duffie
Publisher:
ISBN:
Category :
Languages : en
Pages : 58
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Author: Darrell Duffie
Publisher:
ISBN:
Category :
Languages : en
Pages : 58
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Author: D. Duffie
Publisher:
ISBN:
Category :
Languages : en
Pages : 58
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Author: Fan Yu
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Theory predicts that the quality of a firm's information disclosure can affect the term structure of its corporate bond yield spreads. Using cross-sectional regression and Nelson-Siegel yield curve estimation, I find that firms with higher AIMR disclosure rankings tend to have lower credit spreads. Moreover, this ``transparency spread'' is especially large among short-term bonds. These findings are consistent with the theory of discretionary disclosure as well as the incomplete accounting information model of Duffie and Lando (2001). The presence of a sizable short-term transparency spread can attenuate some of the empirical problems associated with structural credit risk models.
Author: Kay Giesecke
Publisher:
ISBN:
Category :
Languages : en
Pages : 107
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Author: Mascia Bedendo
Publisher:
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Category :
Languages : en
Pages :
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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: Claus Bajlum
Publisher:
ISBN:
Category :
Languages : en
Pages : 58
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This paper estimates the impact of accounting transparency on the term structure of CDS spreads for a large cross-section of firms. Using a newly developed measure of accounting transparency in Berger, Chen & Li (2006), we find a downward-sloping term structure of transparency spreads. Estimating the gap between the high and low transparency credit curves at the 1, 3, 5, 7 and 10-year maturity, the transparency spread is insignificant in the long end but highly significant and robust at 20 bps at the 1-year maturity. Furthermore, the effect of accounting transparency on the term structure of CDS spreads is largest for the most risky firms. These results are strongly supportive of the model by Duffie & Lando (2001), and add an explanation to the underprediction of short-term credit spreads by traditional structural credit risk models.
Author: Marco Sorge
Publisher:
ISBN:
Category : Credit
Languages : en
Pages : 72
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Author: Bing Han
Publisher:
ISBN:
Category :
Languages : en
Pages : 49
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We explore the link between credit and equity markets by considering the informational content of the term structure of credit spreads. A shallower credit term structure predicts decreases in default risk, increases in future profitability, as well as favorable earnings surprises. Further, the slope of the credit term structure negatively predicts future stock returns. While systematic slope risk is also priced, information diffusion from the credit market to equities, particularly in less visible stocks, plays an additional role in accounting for return predictability from credit slopes: Such predictability is less evident in stocks with high institutional ownership, analyst coverage, and liquidity, and vice versa.
Author:
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ISBN:
Category : Bonds
Languages : en
Pages :
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Author: Shigeo Kusuoka
Publisher: Springer Science & Business Media
ISBN: 443167909X
Category : Business & Economics
Languages : en
Pages : 167
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Book Description
The role of asymmetric information in allocation of resources, together with the associated information-revelation process, has long been a central focus of economic research. While the bulk of the literature addresses these is sues within the framework of principal-agent relationship, which essentially reduces the problem to the sole principal's (the sole Stackelberg leader's) optimization problem subject to the agents' (the Stackelberg followers') re sponses, there are recent attempts to extend analysis to other economic setups characterized by different relationships among decision-makers. A notable strand of such attempts is the core analysis of incomplete in formation. Here, there is no Stackelberg-type relationship, and more impor tantly the players can talk to each other for coordinated choice of strategies. See, e.g., Wilson (1978) for a pioneering work; Yannelis (1991) for formula tion of feasibility of a strategy as its measurability; Ichiishi and Idzik (1996) for introduction of Bayesian incentive-compatibility to this strand; Ichiishi, Idzik and Zhao (1994) for information revelation (that is, endogenous deter mination of updated information structures); Ichiishi and Radner (1997) and Ichiishi and Sertel (1998) for studies of a specific model of Chandler's firm in multidivisional form for sharper results; and Vohra (1999) for a recent work. It is a common postulate in these works that every player takes part in design of a mechanism and also in execution of the signed contract.
