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Credit spreads: theory and evidence about the information content of stocks, bonds and cdss

  • Peña Sánchez de Rivera, Juan Ignacio
  • Forte, Santiago

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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File URL: http://e-archivo.uc3m.es/bitstream/handle/10016/125/wb063310.pdf?sequence=1
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Paper provided by Universidad Carlos III de Madrid. Departamento de Economía de la Empresa in its series DEE - Working Papers. Business Economics. WB with number wb063310.

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Date of creation: May 2006
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Handle: RePEc:cte:wbrepe:wb063310
Contact details of provider: Web page: http://www.business.uc3m.es/es/index

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  20. Hull, John & Predescu, Mirela & White, Alan, 2004. "The relationship between credit default swap spreads, bond yields, and credit rating announcements," Journal of Banking & Finance, Elsevier, vol. 28(11), pages 2789-2811, November.
  21. Merton, Robert C., 1973. "On the pricing of corporate debt: the risk structure of interest rates," Working papers 684-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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