The term structure of credit risk.

• Other Authors: Hu, Wen-wei.
• Format: Others
• Language: English; Chinese
• Published: 2000
• Subjects: Bonds > mathematical models; Credit > Management > Mathematical models; Risk management > Mathematical models
• Online Access: http://library.cuhk.edu.hk/record=b6073914; http://repository.lib.cuhk.edu.hk/en/item/cuhk-342924

Credit risk is an important source of risk for almost all of the financial securities. The frequent and serious financial crisis has made credit risk a sensitive and crucial consideration for financial institutions, corporations, and individual investors. The accurate pricing for credit risk and credit risky assets depends crucially upon the credit risk term structure---it implies the market expectation for the future credit risk. However, the credit risk analysis is still in its very early stages of development. The investigation about the credit risk term structure, especially the empirical exploration, has many blank points. Earlier research on the credit risk term structure mainly concentrates on the slopes, pertaining to the simple linear term structure which is not applicable to the middle credit quality assets. Thus the curvature of the spread curves may infer snore information about the changes of future credit qualities, the credit cycles, and the recurring business cycles. In this thesis, a bond pair approach is developed to study the shape (curvature as well as slope) of individual spread curves, and the relationship among spread curves for bonds with different ratings. We uncover downward sloping spread curves for triple C and double C bonds and upward sloping spread curves for triple A+ and triple A bonds. We also uncover hump-shaped spread curves for middle-graded bonds including double A to single B, and there exist peak points on these spread curves. We document the relationship among spread curves for bonds with different ratings In terms of time to peak and peak spread. We conclude that, in comparing higher rated bonds (say, double A) with lower rated bonds (say, single B), the credit spread is higher and time to peak is shorter for the latter than the former. In particular, these hump-shaped curves are bounded from above by downward sloping spread curves for triple C and double C bonds and bounded from below by upward sloping spread curves for triple A+ and triple A bonds. These findings provide a good explanation for the middle-rated bonds' spread curves. This evidence helps us to better understand the credit risk term structure, to accurately price credit risk and credit risky assets, and to appropriately manage credit risk. === Hu Wen-wei. === "August 2000." === Adviser: Jia He. === Source: Dissertation Abstracts International, Volume: 61-08, Section: A, page: 3284. === Thesis (Ph.D.)--Chinese University of Hong Kong, 2000. === Includes bibliographical references (p. 93-111). === Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. === Electronic reproduction. Ann Arbor, MI : ProQuest dissertations and theses, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. === Abstracts in English and Chinese. === School code: 1307.