Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85707
Authors: 
Houweling, Patrick
Hoek, Jaap
Kleibergen, Frank
Year of Publication: 
1999
Series/Report no.: 
Tinbergen Institute Discussion Paper 99-027/4
Abstract: 
We present a new framework for the joint estimation of the default-free government term structure and corporate credit spread curves. By using a data set of liquid, German mark denominated bonds, we show that this yields more realistic spreads than traditionally obtained spread curves that result from subtracting independently estimated government and corporate term structures. The obtained spread curves are smooth functions of time to maturity, as opposed to the twisting curves one gets from the traditional method, and are less sensitive to model specifications. To determine the ‘optimal’ model specification, we use a newly developed test statistic that compares spread curves from competing models.
Subjects: 
Term structure estimation
Credit spreads
Corporate bonds
Splines
JEL: 
G12
G13
C13
Document Type: 
Working Paper

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