This paper studies the macroeconomic determinants of the term structures of Treasury yields, corporate bond credit spreads, and corporate bond liquidity spreads in a unified no-arbitrage framework. Four economic factors, monetary conditions, inflation, real output, and financial market...

This paper examines the relationship between CDS and bond markets in the context of the financial crisis by employing daily data between January 2007 and September 2014. To the best of our knowledge this is the first study that analyses the incorporation of new information for CDSs and bonds...

This paper presents a new approach, based on the Merton model, to decomposing corporate bond spreads into the expected loss, bond risk premium and liquidity premium components. The approach focuses on establishing the bond risk premium using the equity risk premium and the hedge ratio, which are...

This study investigates how credit spread dynamically responds to the change in aggregate Tobin's q ratio. The VAR results from analyzing quarterly data from 1951 Q4 to 2012 Q4 reveal that credit spread drops significantly following the shock to the change in aggregate Tobin's q ratio. There is...

Lack of shareholders' commitment about debt and investment policies increases the cost of debt by a quantity that we refer to as the agency (credit) spread. The agency spread increases with the number of periods for which debt holders are exposed to policies that decrease the value of debt: from...

This paper studies the asset pricing implications of idiosyncratic labor income tail risk on credit spread. I propose a model featuring an incomplete market, heterogeneous households with recursive preference, and comovement of tail risk in labor income and firm cash flow growth. The model...

We study the determinants of the subprime mortgage loan spread, with a particular focus on funding liquidity and default-liquidity interaction effects. We find that sector-level as well as macro funding liquidity provision affected subprime loan rates, explaining a significant portion of the...

We find a significant positive relation between changes in policy uncertainty and changes in credit spreads. Macroeconomic conditions, including general uncertainty, do not explain this result, which also holds when we use instrumental variables to address endogeneity issues. Policy uncertainty...

This paper analyses leading indicator properties of a broad set of credit spreads, compiled on the basis of information from both corporate bonds and bank loans for forecasting of real activity, unemployment, inflation and lending volumes in the euro area and in five major European economies. It...

This paper investigates the usefulness of the term structure of credit spreads to predict the business cycle in Japan. Our analyses provide clear evidence that the term structure of credit spreads has more predictive power than the government bond yield. Specifically, the paper shows that the...