Variations in Credit Spread Term Structures

Publication Type

Journal Article

Publication Date

7-2013

Abstract

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.

Keywords

corporate bond, credit risk, credit spread term structure

Discipline

Finance and Financial Management

Research Areas

Finance

Publication

Journal of Business and Economics

Volume

4

Issue

7

First Page

571

Last Page

594

ISSN

2155-7950

Identifier

10.15341/jbe(2155-7950)/07.04.2013/003

Publisher

Academic Star Publishing

Additional URL

https://doi.org/10.15341/jbe(2155-7950)/07.04.2013/003

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