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The Market Price of Credit Risk : An Empirical Analysis of Interest Rate Swap Spreads

Liu, Jun - 2002

financial markets: interest rate swap spreads. Our approach consists of jointly modeling the swap and Treasury term structures … significant. We also find that credit premia in swap spreads are positive on average. These premia, however, vary significantly …

Persistent link: https://www.econbiz.de/10012469724

Corporate Yield Spreads : Default Risk or Liquidity? New Evidence from the Credit-Default Swap Market

Longstaff, Francis A. - 2004

We use the information in credit-default swaps to obtain direct measures of the size of the default and nondefault components in corporate spreads. We find that the majority of the corporate spread is due to default risk. This result holds for all rating categories and is robust to the...

Persistent link: https://www.econbiz.de/10012468275

A Black Swan in the Money Market

Taylor, John B. - 2008

At the center of the financial market crisis of 2007-2008 was a highly unusual jump in spreads between the overnight inter-bank lending rate and term London inter-bank offer rates (Libor). Because many private loans are linked to Libor rates, the sharp increase in these spreads raised the cost...

Persistent link: https://www.econbiz.de/10012464706

Bank funding risk, reference rates, and credit supply

Cooperman, Harry R.; Duffie, Darrell; Yang, Yilin; … - 2023

Persistent link: https://www.econbiz.de/10014246457

Bank Funding Risk, Reference Rates, and Credit Supply

Cooperman, Harry; Duffie, Darrell; Luck, Stephan; Wang, … - National Bureau of Economic Research - 2023

Corporate credit lines are drawn more heavily when funding markets are more stressed. This covariance elevates expected bank funding costs. We show that credit supply is dampened by the associated debt-overhang cost to bank shareholders. Until 2022, this impact was reduced by linking the...

Persistent link: https://www.econbiz.de/10014226104

An Evaluation of Multi-Factor CIR Models Using LIBOR, Swap Rates, and Cap and Swaption Prices

Jagannathan, Ravi - 2001

We evaluate the classical Cox, Ingersoll and Ross (1985) (CIR) model using data on LIBOR, swap rates and caps and … swaptions. With three factors the CIR model is able to fit the term structure of LIBOR and swap rates rather well. The model is … able to match the hump shaped unconditional term structure of volatility in the LIBOR-swap market. However, statistical …

Persistent link: https://www.econbiz.de/10012470033

Quantifying Liquidity and Default Risks of Corporate Bonds over the Business Cycle

Chen, Hui - 2014

We develop a structural credit risk model to examine how the interactions of liquidity and default risk affect corporate bond pricing. By explicitly modeling debt rollover and by endogenizing the holding costs via collateralized financing, our model generates rich links between liquidity risk...

Persistent link: https://www.econbiz.de/10012458027

Endogenous Liquidity and Defaultable Bonds

He, Zhiguo - 2012

This paper studies the interaction between fundamental and liquidity for defaultable corporate bonds that are traded in an over-the-counter secondary market with search frictions. Bargaining with dealers determines a bond's endogenous liquidity, which depends on both the firm fundamental and the...

Persistent link: https://www.econbiz.de/10012460252

Macroeconomic Conditions and the Puzzles of Credit Spreads and Capital Structure

Chen, Hui - 2010

I build a dynamic capital structure model that demonstrates how business-cycle variations in expected growth rates, economic uncertainty, and risk premia influence firms' financing and default policies. Countercyclical fluctuations in risk prices, default probabilities, and default losses arise...

Persistent link: https://www.econbiz.de/10012462506

Taxes, Default Risk, and Yield Spreads

Yawitz, Jess B. - 1983

This paper represents an extension and integration of recent empirical and theoretical research on default risk and taxability. The purpose of the paper is to develop and test a model of interest rate spreads which incorporates both the effect of taxes and differences in default probabilities in...

Persistent link: https://www.econbiz.de/10012477884