Predicting credit spreads
Predictions of firm-level credit spreads based on the current spot and forward credit spreads can be significantly improved upon by using the information contained in the shape of the credit-spread curve. However, the current credit-spread curve is not a sufficient statistic for predicting future out-of-sample credit spreads; predictions can be significantly improved upon by exploiting the information contained in the shape of the riskless yield curve. In the presence of credit-spread and riskless factors, other macroeconomic, marketwide, and firm-specific risk variables do not significantly improve predictions of credit spreads. These results have important implications for credit-spreads modeling as well as for better understanding corporate capital structure and risk management policies.
Year of publication: |
2010
|
---|---|
Authors: | Krishnan, C.N.V. ; Ritchken, Peter H. ; Thomson, James B. |
Published in: |
Journal of Financial Intermediation. - Elsevier, ISSN 1042-9573. - Vol. 19.2010, 4, p. 529-563
|
Publisher: |
Elsevier |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
On forecasting the term structure of credit spreads
Krishnan, C.N.V., (2007)
-
On credit spread slopes and predicting bank risk
Krishnan, C.N.V., (2004)
-
Krishnan, C.N.V., (2010)
- More ...