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| Author: | Diaz, A. Navarro, E. |
| Title: | Yield Spread and Term to Maturity: Default vs. Liquidity |
| Journal: | European Financial Management
2002 : DEC, VOL. 8:4, p. 449-477 |
| Index terms: | SPAIN BONDS LIQUIDITY MEASUREMENT |
| Language: | eng |
| Abstract: | The aim of this paper is to analyse the term structure of yield spreads between Treasury and non-Treasury bonds in the Spanish markets. The authors focus, particularly, on the impact of liquidity on the value of corporate bonds. In the Spanish corporate bond markets, the impact of liquidity seems to dominate the effects of default risk as far as most of the corporate bonds traded in these markets can be considered as investment-grade bonds. So, the shape of the term structure of yield spreads differs from that observed in more developed and liquid markets, differences that seem to be caused mainly by liquidity. As a first step, the authors propose an alternative way of measuring yield spreads in order to avoid the potential coupon and tax biases. |
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