2009
34/2009
The determinants of option-adjusted delta credit spreads: a comparative analysis of the United States, the United Kingdom and the euro area
Author(s): Leonardo Becchetti – Andrea Carpentieri – Iftekhar Hasan
2009. 78 pages.
Publisher: Bank of Finland
ISBN 978-952-462-556-2 (Printed publication)
ISBN 978-952-462-557-9 (Web publication)
Search words: option-adjusted credit spreads, delta, corporate bond risk, institutional investors, business cycle indicators, G12, G32, E44, Leonardo Becchetti, Andrea Carpentieri, Iftekhar Hasan
We analyse the determinants of the variation of option-adjusted credit spreads (OASs) on a unique database that enlarges the traditional scope of analysis to more disaggregated indexes (combining industry, grade and maturity levels), new variables (volumes of sales and purchases of institutional investors) and a complete set of markets (besides the United States, the United Kingdom and the euro area). With our extended set of regressors we explain almost half of the variability of OASs and find evidence of a significant impact of institutional investors’ purchases and sales on corporate bond risk. We also find that US business cycle indicators significantly affect the variability of OASs in the United Kingdom and the euro area.