The slope of credit spread curves

Jing Zhi Huang, Xiongfei Zhang

Research output: Contribution to journalArticle

8 Scopus citations

Abstract

One way to test a corporate bond pricing model is to examine its predictions for the shape of credit yield spread curves. However, existing empirical studies along this line are known to be problematic because of not controlling properly for the credit quality of bonds (an exception is Helwege and Turner [1999] who study the slope of credit spread curves for high yield coupon bonds). In this article we examine credit spread curves for both zero-coupon and coupon bonds and for both investment grade and high yield bonds. We find that the term structure of credit spreads is usually upward sloping, regardless of credit quality or coupon.

Original languageEnglish (US)
Pages (from-to)56-71
Number of pages16
JournalJournal of Fixed Income
Volume18
Issue number1
DOIs
StatePublished - Jan 1 2008

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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