Spread Term Structure and Default Correlation

Patrick Gagliardini () and Christian Gourieroux

Annals of Economics and Statistics, 2016, issue 123-124, 175-223

Abstract: The aim of this paper is to analyse default correlation and its implications for the term structures of corporate bonds and credit derivatives, reconsidering the results of Jarrow, R., and F. Yu [2001] and the related literature. We first provide different characterisations of spread term structures, when the available information corresponds to the default histories of the firms. The approach is then extended to factor models, in both static and a dynamic framework. We discuss in details the links between default correlation and jumps in short term spreads, and how these phenomena depend on the available information.

Keywords: Corporate Bonds; Credit Risk; Default Correlation; Jumps in Intensities; Copula; Credit Derivatives; Stochastic Intensity (search for similar items in EconPapers)
JEL-codes: C41 G12 G21 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2016:i:123-124:p:175-223

DOI: 10.15609/annaeconstat2009.123-124.0175

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