Macro factors in the term structure of credit spreads
We estimate arbitrage-free term structure models of US Treasury yields and spreads on BBB and Brated corporate bonds in a doubly-stochastic intensity-based framework. A novel feature of our analysis is the inclusion of macroeconomic variables – indicators of real activity, inflation and financial conditions – as well as latent factors, as drivers of term structure dynamics. Our results point to three key roles played by macro factors in the term structure of spreads: they have a significant impact on the level, and particularly the slope, of the curves; they are largely responsible for variation in the prices of systematic risk; and speculative grade spreads exhibit greater sensitivity to macro shocks than high grade spreads.
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- Hans Dewachter & Marco Lyrio, 2002.
"Macro Factors and the Term Structure of Interest Rates,"
International Economics Working Papers Series
wpie007, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics.
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- Hans Dewachter & Marco Lyrio, 2003. "Macro Factors and the Term Structure of Interest Rates," Working Papers Department of Economics ces0304, KU Leuven, Faculty of Economics and Business, Department of Economics.
- Hans Dewachter & Marco Lyrio, 2003. "Macro Factors and the Term Structure of Interest Rates," International Economics Working Papers Series ces0304, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics.
- Dewachter, H.D.R. & Lyrio, M., 2003. "Macro factors and the Term Structure of Interest Rates," ERIM Report Series Research in Management ERS-2003-037-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
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- Duan, Jin-Chuan & Simonato, Jean-Guy, 1999.
"Estimating and Testing Exponential-Affine Term Structure Models by Kalman Filter,"
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- Jin-Chuan Duan & Jean-Guy Simonato, 1995. "Estimating and Testing Exponential Affine Term Structure Models by Kalman Filter," CIRANO Working Papers 95s-44, CIRANO.
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