Relations between Corporate Bonds, Treasuries and the Equity Market: Evidences from Daily Options Adjusted Credit Spreads

2005 ◽  
Author(s):  
Anthony Miloudi ◽  
Franck Moraux
Keyword(s):  
Corporate Bonds ◽  
Equity Market ◽  
Credit Spreads

(Il)liquidity Premium in Credit Markets: A Myth?

2019 ◽  
Keyword(s):  
Cross Section ◽  
Risk Premium ◽  
Credit Markets ◽  
Corporate Bonds ◽  
Credit Spreads ◽  
Limited Evidence ◽  
Liquidity Premium ◽  
Multiple Measures ◽  
The Cross ◽  
Sharpe Ratios

Across multiple measures of “liquidity” and a variety of methods to control for correlated characteristics of more- (less-) liquid bonds, the authors find only limited evidence of a liquidity premium in the cross section of corporate bonds. Specifically, although illiquid bonds have slightly higher credit spreads and directionally higher average returns, portfolios that tilt toward (away from) less (more) liquid bonds exhibit considerably higher levels of volatility. Economically, the low Sharpe ratios of illiquidity factor–mimicking portfolios are hard to justify for an investor. This is puzzling, as theory suggests investors should demand a risk premium for holding less-liquid assets.

scholarly journals Equity Short Selling and the Cost of Debt

2020 ◽  
Vol 13 (2) ◽  
pp. 41-53
Author(s):  
Ali Nejadmaleyeri ◽  
Bilal Erturk
Keyword(s):  
Empirical Evidence ◽  
Corporate Bonds ◽  
Equity Markets ◽  
Short Selling ◽  
Credit Spreads ◽  
Cost Of Debt ◽  
Short Sales ◽  
Pertinent Information ◽  
Short Interest ◽  
The Cost

Empirical evidence suggests that short sales have pertinent information about firm fundamentals. If so, then information from short selling in liquid equity markets can be informative for infrequently traded corporate bonds. The adverse information conveyed by short interest should mean higher cost of debt. Using a large sample of corporate bonds, we examine whether lagged equity short interest affects credit spreads. Highly shorted firms do experience wider credit spreads in the subsequent months. Moreover, the increase in short interest leads to higher credit spreads. Short interest thus seems to contain adverse information about firm fundamentals that can prove useful to bond investors. 

Dealer Inventory Constraints in the Corporate Bond Market during the COVID Crisis

FEDS Notes ◽  
2021 ◽  
Vol 2021 (2918) ◽  
Author(s):  
Craig A. Chikis ◽  
◽  
Jonathan Goldberg ◽  
Keyword(s):  
Financial Market ◽  
Corporate Bonds ◽  
Bond Market ◽  
Market Liquidity ◽  
Corporate Bond ◽  
Credit Spreads ◽  
Corporate Bond Market ◽  
Inventory Constraints ◽  
Bond Spreads

Beginning in late February 2020, market liquidity for corporate bonds dried up and corporate bond credit spreads soared amid broad financial market dislocations related to the COVID-19 pandemic. The causes of this liquidity dry-up and the spike in corporate bond spreads remain subjects of debate.

scholarly journals Do Equity Markets Favor Credit Market News Over Options Market News?

2014 ◽  
Vol 04 (02) ◽  
pp. 1450006 ◽  
Author(s):  
Antje Berndt ◽  
Anastasiya Ostrovnaya
Keyword(s):  
Market News ◽  
Credit Default Swap ◽  
Equity Market ◽  
Credit Spreads ◽  
Option Prices ◽  
Options Market ◽  
Options Markets ◽  
Equity Options ◽  
Abnormal Movements ◽  
Credit Default

Credit default swap (CDS) and equity options markets often experience abnormal swings prior to the announcement of negative credit news. Option prices reveal information about such forthcoming adverse events at least as early as credit spreads, except for negative earnings announcements. Prior to negative credit news being announced, the equity market does not respond to abnormal movements in option prices unless that information has also manifested itself in credit spreads, perhaps because options are perceived as more likely to trade on unsubstantiated rumors than default swaps.

Sign in / Sign up

Export Citation Format

Share Document