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Semantic Scholar · Financial Innovation · 2024 · cites 1

Impact of implicit government guarantee on the credit spread of urban construction investment bonds

Financing sources for urban construction have garnered significant attention globally. Among various financing methods, the urban construction investment bond (UCIB) is unique to China. The UCIB credit spread, which represents the compensation for credit risk, has become a focal point for researchers. However, owing to shortcomings of previous approaches, few scholars have accurately assessed the impact of implicit g…

Rongda Chen, Han Li, Xuhui Tang, Chenglu Jin, Shuonan Zhang

Semantic Scholar · The Journal of Financial Data Science · 2025 · cites 0

Graph-Based Factor Models for Interpretable Credit Spread Decomposition

Factor models are essential tools for understanding asset returns. Statistical factor models such as principal component analysis (PCA) and autoencoders have been widely used to reduce the high-dimensional panels of returns into a lower-dimensional latent space. Although effective at retaining much of the original variance, these models often lack inherent economic interpretation and rely solely on historical data, f…

Ashraf Ghiye, Baptiste Barreau, Laurent Carlier, M. Vazirgiannis

arXiv · arXiv · 2026

Corporate Bond Yield Curve Modeling: A Rating-Based Regime-Switching Generalized CIR Approach

Persistent shifts in term-structure dynamics undermine the stability of single-regime models in long samples. We develop an arbitrage-free regime-switching generalized CIR (RS-GCIR) model that jointly prices the Chinese government bond (CGB) curve and corporate bond curves. To capture the systematic transmission from interest-rate conditions to credit spreads, we structure the model into two blocks and price corporat…

Maochun Xu, Yunqi Liang, Yi Hong

arXiv · arXiv · 2024

Credit Spreads' Term Structure: Stochastic Modeling with CIR++ Intensity

This paper introduces a novel stochastic model for credit spreads. The stochastic approach leverages the diffusion of default intensities via a CIR++ model and is formulated within a risk-neutral probability space. Our research primarily addresses two gaps in the literature. The first is the lack of credit spread models founded on a stochastic basis that enables continuous modeling, as many existing models rely on fa…

Mohamed Ben Alaya, Ahmed Kebaier, Djibril Sarr

OpenAlex · American Economic Review · 2012 · cites 2242

Credit Spreads and Business Cycle Fluctuations

Using micro-level data, we construct a credit spread index with considerable predictive power for future economic activity. We decompose the credit spread into a component that captures firm-specific information on expected defaults and a residual component–– the excess bond premium. Shocks to the excess bond premium that are orthogonal to the current state of the economy lead to declines in economic activity and ass…

Simon Gilchrist, Egon Zakrajšek

OpenAlex · Review of Financial Studies · 2009 · cites 608

Explaining Credit Default Swap Spreads with the Equity Volatility and Jump Risks of Individual Firms

This paper attempts to explain the credit default swap (CDS) premium, using a novel approach to identify the volatility and jump risks of individual firms from high-frequency equity prices. Our empirical results suggest that the volatility risk alone predicts 48% of the variation in CDS spread levels, whereas the jump risk alone forecasts 19%. After controlling for credit ratings, macroeconomic conditions, and firms'…

Benjamin Yibin Zhang, Hao Zhou, Haibin Zhu

OpenAlex · The Journal of Finance · 2001 · cites 2183

The Determinants of Credit Spread Changes

ABSTRACT Using dealer's quotes and transactions prices on straight industrial bonds, we investigate the determinants of credit spread changes. Variables that should in theory determine credit spread changes have rather limited explanatory power. Further, the residuals from this regression are highly cross‐correlated, and principal components analysis implies they are mostly driven by a single common factor. Although …

Pierre Collin-Dufresn, Robert S. Goldstein, J. Spencer Martin

OpenAlex · The Journal of Finance · 2001 · cites 824

Do Credit Spreads Reflect Stationary Leverage Ratios?

ABSTRACT Most structural models of default preclude the firm from altering its capital structure. In practice, firms adjust outstanding debt levels in response to changes in firm value, thus generating mean‐reverting leverage ratios. We propose a structural model of default with stochastic interest rates that captures this mean reversion. Our model generates credit spreads that are larger for low‐leverage firms, and …

Pierre Collin‐Dufresne, Robert S. Goldstein

OpenAlex · Econometrica · 2001 · cites 1388

Term Structures of Credit Spreads with Incomplete Accounting Information

We study the implications of imperfect information for term structures of credit spreads on corporate bonds. We suppose that bond investors cannot observe the issuer’s assets directly, and receive instead only periodic and imperfect accounting reports. For a setting in which the assets of the firm are a geometric Brownian motion until informed equityholders optimally liquidate, we derive the conditional distribution …

Darrell Duffie, David Lando

OpenAlex · The Journal of Finance · 1996 · cites 2067

Optimal Capital Structure, Endogenous Bankruptcy, and the Term Structure of Credit Spreads

ABSTRACT This article examines the optimal capital structure of a firm that can choose both the amount and maturity of its debt. Bankruptcy is determined endogenously rather than by the imposition of a positive net worth condition or by a cash flow constraint. The results extend Leland's (1994a) closed‐form results to a much richer class of possible debt structures and permit study of the optimal maturity of debt as …

Hayne E. Leland, Klaus Bjerre Toft

OpenAlex · Review of Financial Studies · 2022 · cites 55

Commonality in Credit Spread Changes: Dealer Inventory and Intermediary Distress

Abstract Two intermediary-based factors—a corporate bond dealer inventory measure and a broad intermediary distress measure—explain more than 40$\%$ of the puzzling common variation in credit spread changes beyond canonical structural factors. A simple intermediary-based model with partial market segmentation accounts for intermediary factors’ explanatory power and delivers three further implications with empirical s…

Zhiguo He, Paymon Khorrami, Zhaogang Song

arXiv · arXiv · 2026

Three-Currency HJM for Brazilian Credit Markets

This paper develops a three-currency Heath-Jarrow-Morton framework in which corporate credit is treated as a separate economy, connected to the nominal and real economies through synthetic inflation and credit exchange rates. The framework produces a testable identity. Under joint no-arbitrage, the credit spread of an issuer expressed over the inflation-rateindexed risk-free curve equals the same issuer's credit spre…

Raphael Coelho

arXiv · arXiv · 2024

Stress index strategy enhanced with financial news sentiment analysis for the equity markets

This paper introduces a new risk-on risk-off strategy for the stock market, which combines a financial stress indicator with a sentiment analysis done by ChatGPT reading and interpreting Bloomberg daily market summaries. Forecasts of market stress derived from volatility and credit spreads are enhanced when combined with the financial news sentiment derived from GPT-4. As a result, the strategy shows improved perform…

Baptiste Lefort, Eric Benhamou, Jean-Jacques Ohana, David Saltiel, Beatrice Guez

OpenAlex · BIS quarterly review · 2016 · cites 151

Covered interest parity lost: understanding the cross-currency basis

Covered interest parity verges on a physical law in international finance. And yet it has been systematically violated since the Great Financial Crisis. Especially puzzling have been the violations since 2014, even once banks had strengthened their balance sheets and regained easy access to funding. We offer a framework to think about these violations, stressing the combination of hedging demand and tighter limits to…

Claudio Borio, Robert N. McCauley, Patrick McGuire, Vladyslav Sushko

OpenAlex · The Journal of Finance · 2014 · cites 823

A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk

ABSTRACT We model a loop between sovereign and bank credit risk. A distressed financial sector induces government bailouts, whose cost increases sovereign credit risk. Increased sovereign credit risk in turn weakens the financial sector by eroding the value of its government guarantees and bond holdings. Using credit default swap (CDS) rates on European sovereigns and banks, we show that bailouts triggered the rise o…

Viral V. Acharya, Itamar Drechsler, Philipp Schnabl

OpenAlex · National Bureau of Economic Research · 2007 · cites 235

How Sovereign is Sovereign Credit Risk?

We study the nature of sovereign credit risk using an extensive sample of CDS spreads for 26 developed and emerging-market countries. Sovereign credit spreads are surprisingly highly correlated, with just three principal components accounting for more than 50 percent of their variation. Sovereign credit spreads are generally more related to the U.S. stock and high-yield bond markets, global risk premia, and capital f…

Francis A. Longstaff, Jun Pan, Lasse Heje Pedersen, Kenneth J. Singleton

OpenAlex · Journal of Financial and Quantitative Analysis · 2016 · cites 123

Real Economic Shocks and Sovereign Credit Risk

Abstract We provide new empirical evidence that U.S. expected growth and consumption volatility are closely related to the strong comovement in sovereign spreads. We rationalize these findings in an equilibrium model with recursive utility for credit default swap (CDS) spreads. The framework links a reduced-form default process with country-specific sensitivity to expected growth and macroeconomic uncertainty. Exploi…

Patrick Augustin, Roméo Tédongap

Wiki Entities · 36

Economy

China Credit Impulse

China credit impulse measures the change in new credit growth relative to GDP and is widely used as a leading indicator for Chinese demand and global cyclical momentum.

Emerging Markets

EMBI Sovereign Spread

EMBI sovereign spread measures the yield premium on emerging-market sovereign debt over U.S. Treasuries and serves as a key gauge of EM credit risk and external financing stress.

Money Market Fund Assets

Money market fund assets track the amount of cash parked in short-term low-risk vehicles, providing insight into liquidity preference, deposit substitution, and defensive positioning.

Bank Term Funding Program Usage

BTFP usage tracks how much funding banks obtain through the Bank Term Funding Program, offering insight into balance-sheet stress and demand for official liquidity backstops.

Discount Window Borrowing

Discount Window borrowing measures bank use of Federal Reserve emergency liquidity and serves as a signal of funding pressure and banking-sector strain.

Banking

Regional Bank ETF

Regional Bank ETF performance helps track stress in smaller and mid-sized banks, especially around deposit stability, asset quality, and local credit conditions.

Banking

KBW Bank Index

KBW Bank Index tracks the equity performance of major U.S. banks and provides insight into banking-sector health, credit transmission, and market confidence.

Banking

Bank CDS Index

Bank CDS Index tracks the cost of insuring major bank credit risk and serves as a real-time indicator of banking-system stress and confidence.

Loan Officer Survey

The Loan Officer Survey tracks bank lending standards and loan demand, providing insight into whether credit supply is tightening or easing in the real economy.

Investment Grade OAS

Investment Grade OAS measures the spread of high-quality corporate bonds over Treasuries after adjusting for embedded options, helping track broad corporate credit conditions.

High Yield OAS

High Yield OAS measures the spread of high-yield corporate bonds over risk-free Treasuries after adjusting for embedded options, serving as a key gauge of speculative credit stress.

Derivatives

Skew

Skew measures the relative richness of downside versus upside implied volatility, helping track hedging demand and asymmetry in market risk pricing.

Derivatives

Dealer Gamma Positioning

Dealer gamma positioning describes whether option dealers are structurally long or short gamma, shaping how hedging flows amplify or dampen market moves.

Fixed Income

Indirect Bidder Allotment

Indirect bidder allotment tracks the share of Treasury auctions awarded to indirect bidders, often used as a proxy for foreign and institutional demand.

Fixed Income

Treasury Auction Tail

Treasury auction tail measures how much the auction clears above or below the expected market yield, providing a sensitive signal of auction quality and investor demand.

Fixed Income

Treasury Auction Bid-to-Cover Ratio

Treasury auction bid-to-cover ratio measures the amount of demand relative to supply at an auction and is used to assess investor appetite for government debt.

QT Pace

QT pace refers to the speed at which the Federal Reserve allows assets to roll off its balance sheet, affecting reserves, duration supply, and market liquidity.

Fed Balance Sheet

The Fed balance sheet reflects the scale of Federal Reserve asset holdings and is a major driver of reserves, liquidity conditions, and policy transmission.

Bank Reserve Balances

Bank reserve balances reflect the quantity of reserves held by banks at the Federal Reserve and are central to understanding liquidity distribution and financial system stability.

Treasury General Account

Treasury General Account tracks the U.S. Treasury’s cash balance at the Federal Reserve and influences system liquidity by absorbing or releasing reserves.

LIBOR-OIS Spread

LIBOR-OIS spread tracks the gap between unsecured bank funding rates and overnight indexed swap rates, historically serving as a benchmark for banking-system stress.

TED Spread

TED Spread measures the difference between interbank lending rates and short-term U.S. government bill yields, historically used as a gauge of credit and funding stress.

SOFR

SOFR is the Secured Overnight Financing Rate, a key benchmark for U.S. dollar funding based on overnight Treasury repo transactions.

Equity

S&P 500 Earnings Yield

S&P 500 Earnings Yield measures expected earnings relative to price and is useful for assessing valuation and comparing equities with bond yields.

Macro Policy

Financial Conditions Index

A Financial Conditions Index aggregates variables such as rates, credit spreads, equities, and the dollar to measure how supportive or restrictive the market environment is for growth and risk assets.

Commodities

Copper Price

Copper price is widely used as a proxy for industrial activity, manufacturing demand, and global growth expectations.

Commodities

Gold Price

Gold price reflects demand for a non-yielding reserve asset and is often used as a signal for real yields, macro uncertainty, and confidence in fiat systems.

Reverse Repo Facility Usage

Reverse Repo Facility usage shows how much cash is being parked at the Federal Reserve overnight and helps track reserve distribution, collateral demand, and system liquidity conditions.

Rates

Repo Rate

Repo rates reflect the cost of short-term secured borrowing against collateral and are central to understanding liquidity, Treasury market functioning, and funding stress.

Rates

US 10-Year Real Yield

US 10-Year Real Yield measures the inflation-adjusted yield on 10-year Treasuries and is a key benchmark for discount rates, financial conditions, and macro asset pricing.

Economy

US 10-Year Breakeven Inflation

US 10-Year Breakeven Inflation reflects the inflation rate implied by the gap between nominal Treasuries and TIPS, serving as a market-based gauge of long-term inflation expectations.

Rates

3M10Y Treasury Curve

The 3M10Y Treasury curve compares 10-year Treasury yields with 3-month Treasury bill yields and is closely watched as a recession and policy-cycle indicator.

Derivatives

VIX Index

VIX Index measures implied volatility in S&P 500 options and is widely used as a shorthand for equity market fear and risk aversion.

CDX HY Index

CDX HY Index tracks the cost of insuring a basket of North American high-yield corporate credit and serves as a sensitive gauge of credit risk appetite and stress.

CDX IG Index

CDX IG Index tracks the cost of insuring a basket of North American investment-grade corporate credit and is widely used as a real-time gauge of credit stress and financial conditions.

FRA-OIS Spread

FRA-OIS spread measures the difference between interbank funding expectations and overnight indexed swap rates, often used as a gauge of banking and short-term funding stress.

Option Blackboard · 5

code

Gamma Regime Scanner

Code-linked scanner pattern that maps front-vol stress, ATM IV, and dealer gamma context into Blackboard + Options Lab actions.

vol-structure

IV Rank & Surface Filter

Vol-structure note for classifying rich vs cheap ATM IV and surface dispersion before choosing credit or debit templates.

code

Put/Call Flow Watch

Scanner code fragment for put/call ratio and open-interest activity on the ATM chain window.

strategy

Defined-Risk Bridge Playbook

Strategy bridge from Blackboard scanner cards into Options Lab templates without implying live broker execution.

greeks

Greeks Dynamics Sandbox

Educational IV × Greeks × surface sandbox already mounted on the Blackboard — synthetic regimes for pedagogy beside the live scanner.

Encyclopedia · 24

2s10s Spread Fed

2s10s Spread Fed (Rates).

2s5s10s Fly Fed

2s5s10s Fly Fed (Rates).

3M10Y Treasury Curve

The 3M10Y Treasury curve compares 10-year Treasury yields with 3-month Treasury bill yields and is closely watched as a recession and policy-cycle indicator.