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 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.
corporate bond, credit risk, credit spread term structure
Finance and Financial Management
Journal of Business and Economics
Academic Star Publishing
LIM, Kian Guan; ZHOU, Yi; and LI, Yun.
Variations in Credit Spread Term Structures. (2013). Journal of Business and Economics. 4, (7), 571-594. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/3588