THE TIME-VARYING BEHAVIOUR OF CREDIT SPREADS ON YEN EUROBONDS

Abstract

This study develops an equilibrium model of credit spreads on Japanese yen Eurobonds based on a model proposed by Collin-Dufresne, Goldstein and Martin (2001). We find the asset factor, as proxied by the change in the stock market index, has only a limited effect, while the interest rate factor has the over-riding influence. There is also evidence that currency volatility and changes in the term structure occasionally have an effect on spread behaviour. Analysis over several subperiods, based around key economic events, demonstrates that the relative weight of these explanatory variables change over time.

Citation

Batten, J.A., Hogan, W.P. and Pynnönen, S. (2003), "THE TIME-VARYING BEHAVIOUR OF CREDIT SPREADS ON YEN EUROBONDS", Choi, J.J. and Hiraki, T. (Ed.) The Japanese Finance: Corporate Finance and Capital Markets in ... (International Finance Review, Vol. 4), Emerald Group Publishing Limited, Leeds, pp. 379-404. https://doi.org/10.1016/S1569-3767(03)04018-4