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CREDIT SPREADS: THEORY AND EVIDENCE ABOUT THE INFORMATION CONTENT OF STOCKS, BONDS AND CDSs

  • Juan Ignacio Pena

    ()

  • Santiago Forte

    ()

This paper presents a procedure for computing homogeneous measures of credit risk from stocks, bonds and CDSs. The measures are based on bond spreads (BS), CDS spreads (CDS) and implied stock market credit spreads (ICS). We compute these measures for a sample of North American and European firms and find that in most cases, the stock market leads the credit risk discovery process with respect to bond and CDS markets.

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Paper provided by Universidad Carlos III, Departamento de Economía de la Empresa in its series Business Economics Working Papers with number wb063310.

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Date of creation: May 2006
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Handle: RePEc:cte:wbrepe:wb063310
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  9. Francis A. Longstaff & Sanjay Mithal & Eric Neis, 2004. "Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit-Default Swap Market," NBER Working Papers 10418, National Bureau of Economic Research, Inc.
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