Changes in the payday risk premium
payday risk
Another central result from the above-mentioned study is that the average bond-by-bond correlations are higher within markets than across currencies. Investors obviously tend to compare spread levels of an issuer’s bonds rather in one currency than across currencies. This suggests that there is a certain degree of segmentation in international credit markets, and that the different investor bases at least temporarily may have differing views on one name. Kercheval et al. (2003) argue that credit spread changes in a market largely reflect changes in the risk premium required by investors to hold securities from a certain sector and with a given credit quality. Fluctuations of the credit spread therefore should be primarily due to changes in overall economic and political conditions, which can differ substantially across markets. This explanation is consistent with their empirical observations of a high correlation across sectors and ratings within a single market.
payday risk
