The Predictive Power of Credit Spreads in Return and Risk

The Predictive Power of Credit Spreads in Return and Risk

• Autor
• Bruno Ferreira Rodrigues
• Co-autores
• Afonso de Campos Pinto , Clemens Vinicius de Azevedo Nunes
• Resumo

• This paper studies the predictive role of credit spreads in determining future returns and downside risks in fixed income markets. Within the framework of modern portfolio theory, optimal asset allocation depends on reliable estimates of expected returns and risk. While credit spreads are traditionally interpreted as measures of credit risk, this paper argues that they also contain forward-looking information about both expected returns and downside risk, making them a potentially useful state variable for portfolio construction.

• Palavras-chave
• Credit spreads; CDS; Return predictability; Expected shortfall; Fixed income risk
• Modalidade
• Comunicação oral
• Área Temática
• Apreçamento de Ativos

Voltar Download