Market Conditions, Default Risk and Credit Spreads

摘要：

This study conducts an empirical examination of the impact of market conditions on credit spreads motivated by recently developed structural credit risk models. Using CDS spreads for credit spreads, we find that in the time series, credit spreads are decreasing in GDP growth rate, but increasing in GDP growth volatility. Credit spreads are also lower when investor sentiment is high and when the systematic jump risk is low. In the cross section, we confirm that cash flow volatility raises credit spreads. More importantly, we demonstrate that the impact of market conditions is substantially affected by firm heterogeneity. We show that during economic expansions, ceteris paribus, firms with high cash flow betas have lower credit spreads than those with low cash flow betas. This relation disappears during economic recessions, consistent with theoretical predictions.

关键词： Credit Risk Credit Default Swaps Credit Spreads Market Conditions

作者: Dragon Yongjun Tang Hong Yan

作者单位: School of Economics and Finance,Room 908,KK Leung Building,The University of Hong Kong,Pokfulam Road Department of Finance,Moore School of Business,University of South Carolina,Columbia,SC 29208

会议类型: 国际会议

会议名称: 2008年中国金融国际年会

会议地点: 大连

会议语种:英文

页码: 1-40

在线出版日期: 2008-07-02（万方平台首次上网日期，不代表论文的发表时间）