The distribution of yen denominated credit spreads
- Publication Type:
- Japanese Fixed Income Markets: Money, Bond and Interest Rate Derivatives, 2006, 1, pp. 207 - 232
- Issue Date:
The credit spread represents the difference in the yields between different risk or ratings classes of securities with the same maturity. The objective of this study is to provide an understanding of the distributional qualities of credit spreads between different risk and maturity classes of Yen denominated Eurobonds. Yen denominated Eurobonds represent the largest market segment after U.S. dollar denominated issues. We being by first measuring the moments of the distributions of the credit spread series, and then examine different distributional models which may be consistent with the observed spread distributions, OUf results provide strong evidencein favour of the yen credit spread series conforming to a mixtureof two Normal distributions. The implications of these results for credit risk management are also discussed.
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