The Term Structure of Credit Spreads in Project Finance

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ISBN 13 :
Total Pages : 72 pages
Book Rating : 4.3/5 ( download)

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Book Synopsis The Term Structure of Credit Spreads in Project Finance by : Marco Sorge

Download or read book The Term Structure of Credit Spreads in Project Finance written by Marco Sorge and published by . This book was released on 2004 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt:

The Shape of the Term Structure of Credit Spreads

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ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis The Shape of the Term Structure of Credit Spreads by : Mascia Bedendo

Download or read book The Shape of the Term Structure of Credit Spreads written by Mascia Bedendo and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this empirical paper we investigate the role of interest rate, market and idiosyncratic equity variables in explaining the entire shape of the term structure of credit spreads. Recent empirical literature has highlighted the importance of these components as determinants of the credit spread levels. By analyzing portfolios of straight bonds for both the industrial and financial sectors across investment grade credit ratings, we find that these factors impact credit spread levels at various maturities in a significantly different way. Therefore we conclude that these variables represent important determinants not only of the level, but also of the slope and curvature of credit spread term structures. A closer inspection of the credit spread slope also reveals that it contains important information about future credit spreads, and provides useful insights into the theoretical predictions of the Merton (1974) model.

Macro Factors in the Term Structure of Credit Spreads

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Total Pages : 72 pages
Book Rating : 4.3/5 ( download)

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Book Synopsis Macro Factors in the Term Structure of Credit Spreads by : Jeffery D. Amato

Download or read book Macro Factors in the Term Structure of Credit Spreads written by Jeffery D. Amato and published by . This book was released on 2006 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate arbitrage-free term structure models of US Treasury yields and spreads on BBB and B rated corporate bonds in a doubly-stochastic intensity-based framework. A novel feature of our analysis is the inclusion of macroeconomic variables -- indicators of real activity, inflation and financial conditions -- as well as latent factors, as drivers of term structure dynamics. Our results point to three key roles played by macro factors in the term structure of spreads: they have a significant impact on the level, and particularly the slope, of the curves; they are largely responsible for variation in the prices of systematic risk; and speculative grade spreads exhibit greater sensitivity to macro shocks than high grade spreads. In addition to estimating risk-neutral default intensities, we provide estimates of physical default intensities using data on Moody's KMV EDFs as a forward--looking proxy for default risk. We find that the real and financial activity indicators, along with filtered estimates of the latent factors from our term structure model, explain a large portion of the variation in EDFs across time. Furthermore, measures of the price of default event risk implied by estimates of physical and risk-neutral intensities indicate that compensation for default event risk is countercyclical, varies widely across the cycle, and is higher on average and more variable for higher-rated bonds.

The Term Structure of Credit Spreads and Credit Default Swaps - An Empirical Investigation

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ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis The Term Structure of Credit Spreads and Credit Default Swaps - An Empirical Investigation by : Stefan Trück

Download or read book The Term Structure of Credit Spreads and Credit Default Swaps - An Empirical Investigation written by Stefan Trück and published by . This book was released on 2014 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the term structure of credit spreads and credit default swaps for different rating categories. It is well-known quite that for issuers with lower credit quality higher spreads can be observed in the market and vice versa. However, empirical results on spreads for bonds with the same rating but different maturities are rather controversial. We provide empirical results on the term structure of credit spreads based on a large sample of Eurobonds and domestic bonds from EWU-countries. Further we investigate maturity effects on credit default swaps and compare the results to those of corporate bonds. We find that for both instruments a positive relationship between maturity and spreads could be observed for investment grade debt. For speculative grade debt the results are rather ambiguous. We also find that spreads for the same rating class and same maturity exhibit very high variation.

The Term Structure of Credit Spreads and the Economic Activity

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Total Pages : pages
Book Rating : 4.:/5 (631 download)

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Book Synopsis The Term Structure of Credit Spreads and the Economic Activity by :

Download or read book The Term Structure of Credit Spreads and the Economic Activity written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate arbitrage-free term structure models of US Treasury yields and spreads on BBB and B-rated corporate bonds in a doubly- stochastic intensity-based framework. A novel feature of our analysis is the inclusion of macroeconomic variables - indicators of real activity, inflation and financial conditions - as well as latent factors, as drivers of term structure dynamics. Our results point to three key roles played by macro factors in the term structure of spreads: they have a significant impact on the level, and particularly the slope, of the curves; they are largely responsible for variation in the prices of systematic risk; and speculative grade spreads exhibit greater sensitivity to macro shocks than high grade spreads. In addition to estimating risk-neutral default intensities, we provide estimates of physical default intensities using data on Moody's KMV EDFs"!as a forward-looking proxy for default risk. We find that the real and financial activity indicators, along with filtered estimates of the latent factors from our term structure model, explain a large portion of the variation in EDFs"!across time. Furthermore, measures of the price of default event risk implied by estimates of physical and risk-neutral intensities indicate that compensation for default event risk is countercyclical, varies widely across the cycle, and is higher on average and more variable for higher- rated bonds.

Estimating the Term Structure of Credit Spreads

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ISBN 13 :
Total Pages : 52 pages
Book Rating : 4.:/5 (835 download)

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Book Synopsis Estimating the Term Structure of Credit Spreads by : Antje Berndt

Download or read book Estimating the Term Structure of Credit Spreads written by Antje Berndt and published by . This book was released on 2003 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Systematic Risk, Debt Maturity, and the Term Structure of Credit Spreads

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ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (85 download)

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Book Synopsis Systematic Risk, Debt Maturity, and the Term Structure of Credit Spreads by : Hui Chen

Download or read book Systematic Risk, Debt Maturity, and the Term Structure of Credit Spreads written by Hui Chen and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: We build a dynamic capital structure model to study the link between firms' systematic risk exposures and their time-varying debt maturity choices, as well as its implications for the term structure of credit spreads. Compared to short-term debt, long-term debt helps reduce rollover risks, but its illiquidity raises the costs of financing. With both default risk and liquidity costs changing over the business cycle, our calibrated model implies that debt maturity is pro-cyclical, firms with high systematic risk favor longer debt maturity, and that these firms will have more stable maturity structures over the cycle. Moreover, pro-cyclical maturity variation can significantly amplify the impact of aggregate shocks on the term structure of credit spreads, especially for firms with high beta, high leverage, or a lumpy maturity structure. We provide empirical evidence for the model predictions on both debt maturity and credit spreads

Default Hazards and the Term Structure of Credit Spreads in a Duopoly

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ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (93 download)

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Book Synopsis Default Hazards and the Term Structure of Credit Spreads in a Duopoly by : Varqá Khadem

Download or read book Default Hazards and the Term Structure of Credit Spreads in a Duopoly written by Varqá Khadem and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

The Shape of the Term Structure of Credit Spreads

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ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (67 download)

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Book Synopsis The Shape of the Term Structure of Credit Spreads by :

Download or read book The Shape of the Term Structure of Credit Spreads written by and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Asymmetric Information, Dynamic Debt Issuance, and the Term Structure of Credit Spreads

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ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (116 download)

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Book Synopsis Asymmetric Information, Dynamic Debt Issuance, and the Term Structure of Credit Spreads by : Luca Benzoni

Download or read book Asymmetric Information, Dynamic Debt Issuance, and the Term Structure of Credit Spreads written by Luca Benzoni and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a tractable model of a firm's dynamic debt and equity issuance policies in the presence of asymmetric information. Because "investment-grade" firms can access debt markets, managers who observe a bad private signal can both conceal this information and shield shareholders from infusing capital into the firm by issuing new debt to service existing debt, thus avoiding default. The implication is that the "asymmetric information channel" can generate jumps to default (from the creditors' perspective) only for those "high-yield" firms that have exhausted their ability to borrow. Thus, our model deepens the "credit spread puzzle" for investment-grade firms.

Credit Spreads and Real Activity

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ISBN 13 :
Total Pages : 72 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Credit Spreads and Real Activity by : Philippe Mueller

Download or read book Credit Spreads and Real Activity written by Philippe Mueller and published by . This book was released on 2011 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores the transmission of credit conditions into the real economy. Specifically, I examine the forecasting power of the term structure of credit spreads for future GDP growth. I find that the whole term structure of credit spreads has predictive power, while the term structure of Treasury yields has none. Using a parsimonious macro-finance term structure model that captures the joint dynamics of GDP, inflation, Treasury yields and credit spreads, I decompose the spreads and identify the drivers of this transmission effect. I show that there is a pure credit component orthogonal to macroeconomic information that accounts for a large part of the forecasting power of credit spreads. The macro factors themselves also contribute to the predictive power, especially for long maturity spreads. Additional factors affecting Treasury yields and credit spreads are irrelevant for predicting future economic activity. The credit factor is highly correlated with the index of tighter loan standards, thus lending support to the existence of a transmission channel from borrowing conditions to the economy. Using data from 2006-2008, I capture the ongoing crisis, during which credit conditions have heavily tightened and I show that the model provides reasonably accurate out-of-sample predictions for this period. As of year-end 2008, the model predicts a contraction of -2% in real GDP growth for 2009, which is lower than comparable survey forecasts.

Systematic Risk, Debt Maturity, and the Term Structure of Credit Spread

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ISBN 13 :
Total Pages : 60 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Systematic Risk, Debt Maturity, and the Term Structure of Credit Spread by : Hui Chen

Download or read book Systematic Risk, Debt Maturity, and the Term Structure of Credit Spread written by Hui Chen and published by . This book was released on 2012 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Commonalities in the Term Structure of Credit Spreads

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ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (111 download)

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Book Synopsis Commonalities in the Term Structure of Credit Spreads by : Abhimanyu Chatterjee

Download or read book Commonalities in the Term Structure of Credit Spreads written by Abhimanyu Chatterjee and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

The Term Structure of Credit Spreads and the Cross-Section of Stock Returns

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ISBN 13 :
Total Pages : 49 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis The Term Structure of Credit Spreads and the Cross-Section of Stock Returns by : Bing Han

Download or read book The Term Structure of Credit Spreads and the Cross-Section of Stock Returns written by Bing Han and published by . This book was released on 2016 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the link between credit and equity markets by considering the informational content of the term structure of credit spreads. A shallower credit term structure predicts decreases in default risk, increases in future profitability, as well as favorable earnings surprises. Further, the slope of the credit term structure negatively predicts future stock returns. While systematic slope risk is also priced, information diffusion from the credit market to equities, particularly in less visible stocks, plays an additional role in accounting for return predictability from credit slopes: Such predictability is less evident in stocks with high institutional ownership, analyst coverage, and liquidity, and vice versa.

Project Finance

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ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (764 download)

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Book Synopsis Project Finance by : Daniel Affolter

Download or read book Project Finance written by Daniel Affolter and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Credit Spreads on Sterling Corporate Bonds and the Term Structure of UK Interest Rates

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ISBN 13 :
Total Pages : 22 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis Credit Spreads on Sterling Corporate Bonds and the Term Structure of UK Interest Rates by : Jeremy Leake

Download or read book Credit Spreads on Sterling Corporate Bonds and the Term Structure of UK Interest Rates written by Jeremy Leake and published by . This book was released on 2005 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores the relationship between credit spreads on sterling corporate bonds and the term structure of UK interest rates. In particular, it examines whether credit spreads are a reliable indicator of corporate bond default risk. Using daily price quotes from 1990 to 1998, the paper finds a small negative relationship between credit spreads on sterling investment-grade corporate bonds and the level and slope of the term structure of UK interest rates. The results are weaker than those found by Longstaff and Schwartz (1995) and Duffee (1996 and 1998) who both examine the relationship between US corporate bond credit spreads and the term structure of US interest rates. The weak relationship found suggests that credit spreads on sterling investment-grade corporate bonds have been driven by factors other than default risk. If so, we should be cautious in interpreting such credit spreads as measures of bond default risk. This result is important to both those in the field of financial stability interested in leading indicators of corporate defaults, and to monetary policy makers interested in the impact of interest rate changes on corporate bond default risk. Similar work should be repeated for sterling sub investment-grade corporate bonds once a sufficiently large data set can be assembled.

On Forecasting the Term Structure of Credit Spreads

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ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (2 download)

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Book Synopsis On Forecasting the Term Structure of Credit Spreads by : C. N. V. Krishnan

Download or read book On Forecasting the Term Structure of Credit Spreads written by C. N. V. Krishnan and published by . This book was released on 2007 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Predictions of firm-by-firm term structures of credit spreads based on current spot and forward values can be improved upon by exploiting information contained in the shape of the credit-spread curve. However, the current credit-spread curve is not a sufficient statistic for predicting future credit spreads; the explanatory power can be increased further by exploiting 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. Current credit-spread and riskless-yield curves impound essentially all marketwide and firm-specific information necessary for predicting future credit spreads"--Federal Reserve Bank of Cleveland web site.