Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152831
Authors: 
Van Landschoot, Astrid
Year of Publication: 
2004
Series/Report no.: 
ECB Working Paper 397
Abstract: 
In this paper, we investigate the determinants of the Euro term structure of credit spreads. More specifically, we analyze whether the sensitivity of credit spread changes to financial and macroeconomic variables depends on bond characteristics such as rating and maturity. According to the structural models and empirical evidence on credit spreads, we find 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. Bonds with lower ratings are more affected by financial and macroeconomic news. Furthermore, we find that liquidity risk significantly increases credit spreads, especially on lower rated bonds.
Subjects: 
Credit risk
Nelson-Siegel
Structural models
JEL: 
C22
E45
G15
Document Type: 
Working Paper

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