While extensive research on the relationship between credit risk and spreads has been produced for bonds and loans separately, few studies have analysed them jointly. We derive a simple structural model where a stochastic default barrier accounts for informational noise, and differences between bond and loan spreads are explained through the different screening ability of bankers and bond-holders. We then test the model on a sample of 7,926 Eurobonds and 5,469 syndicated loans. Empirical results confirm the key finding of the model: while spreads increase as ratings worsen for both bonds and loans, the former show a steeper spread/rating relationship.

What’s different about loans? An analysis of the risk structure of credit spreads

RESTI, ANDREA CESARE;SIRONI, ANDREA
2006

Abstract

While extensive research on the relationship between credit risk and spreads has been produced for bonds and loans separately, few studies have analysed them jointly. We derive a simple structural model where a stochastic default barrier accounts for informational noise, and differences between bond and loan spreads are explained through the different screening ability of bankers and bond-holders. We then test the model on a sample of 7,926 Eurobonds and 5,469 syndicated loans. Empirical results confirm the key finding of the model: while spreads increase as ratings worsen for both bonds and loans, the former show a steeper spread/rating relationship.
2006
9788844903459
D. Masciandaro, G. Bracchi
Banche e geografia - Nuove mappe produttive e metamorfosi del credito
Resti, ANDREA CESARE; Sironi, Andrea
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/3717200
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