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Estimating the Term Structure of Credit Spreads on Euro‐denominated Corporate Bonds

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  • Ombretta Terazzan

Abstract

In this paper, we estimate the term structure of credit spreads on Euro‐denominated corporate bonds with a modified version of the Duffee (1999) intensity‐based model. The empirical analysis considers monthly observations for a sample of investment‐grade euro‐denominated corporate bonds analysed for rating classes. The model is estimated with a maximum likelihood – Kalman filter approach over different sample periods ranging from January 1999 to August 2006. The estimation results, in general, support the application of the theoretical model to the euro‐denominated bond market and exhibit some interesting characteristics of this relatively recent market.

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  • Ombretta Terazzan, 2006. "Estimating the Term Structure of Credit Spreads on Euro‐denominated Corporate Bonds," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 35(3), pages 355-375, November.
    • Handle: RePEc:bla:ecnote:v:35:y:2006:i:3:p:355-375
    DOI: 10.1111/j.1468-0300.2006.00170.x
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