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The determinants of option-adjusted delta credit spreads: a comparative analysis of the United States, the United Kingdom and the euro area

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Author Info

  • Becchetti , Leonardo

    ()
    (Università Tor Vergata)

  • Carpentieri , Andrea

    ()
    (Nextra Investment Management and Università Tor Vergata)

  • Hasan, Iftekhar

    ()
    (Rensselaer Polytechnic Institute, USA and Bank of Finland)

Abstract

We analyse the determinants of the variation of option-adjusted credit spreads (OASs) on a unique database that enlarges the traditional scope of analysis to more disaggregated indexes (combining industry, grade and maturity levels), new variables (volumes of sales and purchases of institutional investors) and a complete set of markets (besides the United States, the United Kingdom and the euro area). With our extended set of regressors we explain almost half of the variability of OASs and find evidence of a significant impact of institutional investors’ purchases and sales on corporate bond risk. We also find that US business cycle indicators significantly affect the variability of OASs in the United Kingdom and the euro area.

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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 34/2009.

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Length: 78 pages
Date of creation: 23 Nov 2009
Date of revision:
Handle: RePEc:hhs:bofrdp:2009_034

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Related research

Keywords: option-adjusted credit spreads; delta; corporate bond risk; institutional investors; business cycle indicators;

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