On Credit-Spread Slopes and Predicting Bank Risk

On Credit-Spread Slopes and Predicting Bank Risk

We examine whether bank credit-spread curves, engendered by subordinated debt, would help predict bank risk. We extract credit-spread curves for each bank each quarter and analyze the predictive properties of credit-spread slopes. We find that credit-spread slopes are significant predictors of futur...

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Veröffentlicht in:Journal of money, credit and banking credit and banking, 2006-09, Vol.38 (6), p.1545-1574
Hauptverfasser: Krishnan, C. N. V., Ritchken, P. H., Thomson, J. B.
Format: Artikel
Sprache:eng
Schlagworte:
Analysis
Bank credit
Bank markets
Bank operations
Banking
Banking industry
Banking system
Banks
Company business management
Credit
Credit ratings
Credit risk
Credit spreads
Economic forecasts
Empirical tests
Financial economics
Financial instruments
Financial risk
Financial risks
Government regulation
Laws, regulations and rules
Management
Market variables
Methods
P values
Risk
Risk management
Spread
Studies
Subordinated debentures
U.S.A
Yield curves
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Beschreibung
Zusammenfassung:We examine whether bank credit-spread curves, engendered by subordinated debt, would help predict bank risk. We extract credit-spread curves for each bank each quarter and analyze the predictive properties of credit-spread slopes. We find that credit-spread slopes are significant predictors of future credit spreads. We also find that credit-spread slopes provide significant additional information on future bank risk variables, over and above other bank-specific and market-wide information.
ISSN:0022-2879
1538-4616
1538-4616
DOI:10.1353/mcb.2006.0084