Credit Spreads Statistical Modeling And Appliciantion

With the continuous expansion of China’s inter-bank corporate bond market,credit spreads modeling has become increasingly important as one indicator of corporate credit risk.Since Merton proposed structural model,it has developed rapidly one the study of credit spread in Europe and other mature bond market.As so far there is still a lot of undiscovered factors for credit spreads.How to use statistical methods to its modeling for more effective factors in credit spreads has become one of the hot research today.Based on Cointegration,VAR theory,this article created the models of time-varing credit spread index data.With comprehensive using of stepwise regression analysis and principal component analysis,this artical has obtained three categories indicators which has significant effect on the credit spreads,default index, liquidity index and systemic index.In a subsequent study,we find the depth of impact,the time of impact,the mechanism of impact and the importance of impact of these factors.Thourgh the modeling of the3-year,10-year,20-year and three years of under AAA,AA+,AA grade credit spreads,we have found some important information,such as:(1) It is still useful of Merton structural model in the inter-bank market of China.There is cointegration relationship between credit spreads and these influential variables.Credit spreads has an adjustment force on itself when it deviate its long-run equilibrium.This force can reduce its deviatation. The quantitative indicators of credit risk is in favor of the bond market rational analysis and prediction.(2) Corporate bonds has disadvantages of unflexible term structure and risk not match the benefit.It will lead to risk-averse investors put money into high-yield money market or the real economy when they face the same risk,which expand the creadit spreads.(3) After building the economic sentiment index,we found that the risk-free interest rates, economic sentiment index and inflation affect10-year corporate bond credit spreads in the Granger sense,and the risk-free interest rates and credit spreads is each other’Granger causality.(4) After the construction of the VAR model of credit spreads,economic sentiment index continues affect credit spreads in the way of first positive after.The order of these factors’contribution on changes in credit spreads is interest rate index, credit spreads itself and the economic sentiment index.This show the reasons of volatility on credit spreads in a certain degree.