Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144271
Authors: 
Van Landschoot, Astrid
Year of Publication: 
2004
Series/Report no.: 
Working Paper Research 57
Abstract: 
In this paper, we analyze wether the sensitivity of credit spread changes to financial and macroeconomic variables depends on bond characteristics such as rating and maturity. First, we estimate the term structure of credit spreads for different rating categories by applying an extension of the Nelson-Siegel method. Then, we analyse the determinants of credit spread changes. According to the structural models and empirical evidence on credit spreads, our results indicate that changes in the level and the slope of the default-free term structure, the market return, implied volatility, and liquidity risk significantly influence credit spread changes. The effect of these factors strongly depends on bond characteristics, especially the rating and to a lesser extent the maturity.
Subjects: 
credit risk
structural models
Nelson-Siegel
JEL: 
C22
G15
Document Type: 
Working Paper

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