On forecasting the term structure of credit spreads

C. N. V. Krishnan, Peter H. Ritchken and James Thomson

No 705, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: 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.

Keywords: Corporate bonds; Rate of return (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-fmk, nep-for and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.26509/frbc-wp-200705 Persistent link
https://www.clevelandfed.org/-/media/project/cleve ... edit-spreads-pdf.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:0705

Ordering information: This working paper can be ordered from

DOI: 10.26509/frbc-wp-200705

Access Statistics for this paper

More papers in Working Papers (Old Series) from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().