Estimating the Term Structure of Credit Spreads on Euro-denominated Corporate Bonds
Article first published online: 20 MAR 2007
Volume 35, Issue 3, pages 355–375, November 2006
How to Cite
Terazzan, O. (2006), Estimating the Term Structure of Credit Spreads on Euro-denominated Corporate Bonds. Economic Notes, 35: 355–375. doi: 10.1111/j.1468-0300.2006.00170.x
- Issue published online: 20 MAR 2007
- Article first published online: 20 MAR 2007
In this paper, we estimate the term structure of credit spreads on Euro-denominated corporate bonds with a modified version of the Duffee (1999) intensity-based model. The empirical analysis considers monthly observations for a sample of investment-grade euro-denominated corporate bonds analysed for rating classes. The model is estimated with a maximum likelihood – Kalman filter approach over different sample periods ranging from January 1999 to August 2006. The estimation results, in general, support the application of the theoretical model to the euro-denominated bond market and exhibit some interesting characteristics of this relatively recent market.