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- Title
Option-Adjusted Delta Credit Spreads: a Cross-Country Analysis.
- Authors
Becchetti, Leonardo; Carpentieri, Andrea; Hasan, Iftekhar
- Abstract
This study analyses the determinants of the variation in option-adjusted credit spreads (OASs) using a unique database and enlarges the traditional analysis to include disaggregated indexes, new variables, and a complete set of markets (USA, UK, and the Eurozone). An extended set of regressors explains almost half the variability of OASs in the three markets. We find that institutional trading activity significantly affects corporate bond spreads, signalling either variation in perceptions of risk or the existence of an indirect measure of liquidity. We also find that US business cycle indicators significantly affect the variability of OASs in the UK and the Eurozone. Finally, we find evidence that stock returns have more influence on high-yield bonds in the Eurozone than in the USA.
- Subjects
UNITED Kingdom; UNITED States; OPTION-adjusted spread analysis; CORPORATE bonds; LIQUIDITY (Economics); JUNK bonds; ECONOMIC indicators; EUROZONE; RATE of return
- Publication
European Financial Management, 2012, Vol 18, Issue 2, p183
- ISSN
1354-7798
- Publication type
Article
- DOI
10.1111/j.1468-036X.2009.00527.x