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2009 | 20 | 9 | 67-86
Tytuł artykułu

CHANGES IN THE DEFAULT COMPONENT OF SPREAD AT A TIME OF FINANCIAL INSTABILITY (Zmiennosc komponentu upadlosciowego marzy wskutek zachwiania stabilnosci finansowej)

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Języki publikacji
PL
Abstrakty
EN
The paper aims to identify factors determining the level of spread in light of the latest theories. The author examines theories related to spread by classifying individual concepts into several categories and looks at theoretical approaches in the context of the latest financial crisis on the U.S. market. He checks to what extent the breakdown of spread at a time of financial instability testifies to its 'decomposition' on the basis of data collected before the crisis. The study makes use of rating agency data on the probability of default depending on the rating. The author also uses rating transition matrices and the theory of Markow chains to determine the share of the default component in spread identified as the difference between the profitability of corporate and Treasury securities. The main advantage of this method is that it adopts a realistic assumption about a gradual change in the quality of debt in a given time period. Considering the limitations linked with the use of the rating transition matrix mentioned in the article, the results of research into the structure of spread at a time of financial instability lead the author to formulate the following conclusions: 1) In accordance with the heuristic approach, the share of the default component is subject to reduction in favor of the liquidity component even though the default factor increases in absolute terms; 2) An increase in the volatility of spread is chiefly determined by the liquidity factor; 3) The proportion of the default component increases with the maturity of bonds; however in each case the share of the default component in spread during a period of financial instability is lower than during a period of financial stability.
Czasopismo
Rocznik
Tom
20
Numer
9
Strony
67-86
Opis fizyczny
Rodzaj publikacji
ARTICLE
Twórcy
  • Pawel Niedziolka, Szkola Glówna Handlowa w Warszawie, Katedra Bankowosci, al. Niepodleglosci 162, 02-554 Warszawa, Poland
Bibliografia
Typ dokumentu
Bibliografia
Identyfikatory
CEJSH db identifier
09PLAAAA067726
Identyfikator YADDA
bwmeta1.element.0ba8d566-e5ab-3a55-93c9-0f2c94fa3e51
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