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The determinants of option adjusted delta credit spreads: A comparative analysis on US, UK and the Eurozone

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  • Becchetti, Leonardo
  • Carpentieri, Andrea
  • Hasan, Iftekhar

Abstract

We analyse the determinants of the variation of option adjusted credit spreads (OASs) on a unique database which enlarges the traditional scope of the 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 (beside US, UK and the Eurozone). With our extended set of regressors we explain almost half of the variability of OASs and we find evidence of the 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 UK and in the Eurozone.

Suggested Citation

  • Becchetti, Leonardo & Carpentieri, Andrea & Hasan, Iftekhar, 2009. "The determinants of option adjusted delta credit spreads: A comparative analysis on US, UK and the Eurozone," CEI Working Paper Series 2009-10, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2009-10
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/29229/wp2009-10.pdf
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    3. Pierre Collin‐Dufresne & Robert S. Goldstein, 2001. "Do Credit Spreads Reflect Stationary Leverage Ratios?," Journal of Finance, American Finance Association, vol. 56(5), pages 1929-1957, October.
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    Cited by:

    1. Leonardo Becchetti & Andrea Carpentieri & Iftekhar Hasan, 2012. "Option†Adjusted Delta Credit Spreads: a Cross†Country Analysis," European Financial Management, European Financial Management Association, vol. 18(2), pages 183-217, March.

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