Credit Spreads Across the Business Cycle

Publikation: KonferencebidragPaperForskningpeer review

Abstrakt

This paper studies how corporate bond spreads vary with the business cycle.
I show that both level and slope of empirical credit spread curves are correlated
with the state of the economy, and I link this to variation in idiosyncratic jump
risk. I develop a structural credit risk model that accounts for both business cycle
and jump risk, and show by estimation that the model captures the counter-cyclical level and pro-cyclical slope of empirical credit spread curves. In addition, I provide a new procedure for estimation of idiosyncratic jump risk, which is consistent with observed shocks to firm fundamentals.
OriginalsprogEngelsk
Publikationsdato2012
Antal sider60
StatusUdgivet - 2012
BegivenhedThe 39th European Finance Association Annual Meeting (EFA 2012) - Copenhagen Business School, Frederiksberg, Danmark
Varighed: 15 aug. 201218 aug. 2012
Konferencens nummer: 39
http://www.efa2012.org/

Konference

KonferenceThe 39th European Finance Association Annual Meeting (EFA 2012)
Nummer39
LokationCopenhagen Business School
LandDanmark
ByFrederiksberg
Periode15/08/201218/08/2012
Internetadresse

Citationsformater

Nielsen, M. S. (2012). Credit Spreads Across the Business Cycle. Afhandling præsenteret på The 39th European Finance Association Annual Meeting (EFA 2012), Frederiksberg, Danmark.