The nonlinear dynamics of corporate bond spreads: Regime-dependent effects of their determinants

Arbeitspapier

This paper studies the behavior of corporate bond spreads during different market regimes between 2004 and 2016. Applying a Markov-switching vector autoregressive (MS-VAR) model, we document that the dynamic impact of spread determinants varies substantially with market conditions. In periods of high volatility, systematic credit risk - rather than interest rate movements - contributes to driving up spreads. Moreover, while market-wide liquidity risk is not priced when volatility is low, it becomes a crucial factor during stress periods. Our results challenge the notion that spreads predominantly capture credit risk and suggest it must be reassessed during periods of financial distress.

Angaben zum Objekt

• ISBN: 978-3-95729-564-4
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Deutsche Bundesbank Discussion Paper ; No. 08/2019

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Multiple or Simultaneous Equation Models: Truncated and Censored Models; Switching Regression Models ; Financial Econometrics ; Asset Pricing; Trading Volume; Bond Interest Rates
• Thema: corporate bond spreads ; regime dependency ; Markov switching ; vector autoregression ; credit spread puzzle

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Fischer, Henning ; Stolper, Oscar
• Ereignis: Veröffentlichung
• (wer): Deutsche Bundesbank
• (wo): Frankfurt a. M.
• (wann): 2019

Weitere Informationen

• Handle: http://hdl.handle.net/10419/193666
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ