2004/04/01 by Francis A. Longstaff, FRANCIS A. LONGSTAFF, SANJAY MITHAL +3 · 2 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Actuarial science #Banking stability, regulation, efficiency #Bond #Business #Corporate bond #Credit Risk and Financial Regulations #Credit default swap #Credit default swap index #Credit derivative #Credit rating #Credit reference #Credit risk #Credit spread (options) #Credit valuation adjustment #Default risk #Economics #Finance #Financial Distress and Bankruptcy Prediction #Financial economics #Financial system #Liquidity risk #Market liquidity #Monetary economics #Yield (engineering) #iTraxx
paper · pdf · doi:10.1111/j.1540-6261.2005.00797.x
openalex publication_date 2004/04/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04
ABSTRACT We use the information in credit default swaps to obtain direct measures of the size of the default and nondefault components in corporate spreads. We find that the majority of the corporate spread is due to default risk. This result holds for all rating categories and is robust to the definition of the riskless curve. We also find that the nondefault component is time varying and strongly related to measures of bond‐specific illiquidity as well as to macroeconomic measures of bond market liquidity.