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Risky Business: An Empirical Study of Leverage and High-Yield Credit Spreads

Nordin, Olof LU (2024) NEKH02 20241
Department of Economics
Abstract
With the growing importance of high-yield bonds, understanding the factors that predominantly drive credit risk in this asset class is essential. This thesis investigates the relationship between credit spreads and leverage for high-yield bonds. Using two fixed effects models on quarterly data between 2021 and 2024, this study analyses whether there exists a non-linear relationship between changes in credit spreads and changes in leverage. The results are supportive of a convex relationship, suggesting that credit spreads widen at an accelerating rate as leverage increases.
Please use this url to cite or link to this publication:
author
Nordin, Olof LU
supervisor
organization
course
NEKH02 20241
year
type
M2 - Bachelor Degree
subject
language
English
id
9156977
date added to LUP
2024-09-24 09:03:27
date last changed
2024-09-24 09:03:27
@misc{9156977,
  abstract     = {{With the growing importance of high-yield bonds, understanding the factors that predominantly drive credit risk in this asset class is essential. This thesis investigates the relationship between credit spreads and leverage for high-yield bonds. Using two fixed effects models on quarterly data between 2021 and 2024, this study analyses whether there exists a non-linear relationship between changes in credit spreads and changes in leverage. The results are supportive of a convex relationship, suggesting that credit spreads widen at an accelerating rate as leverage increases.}},
  author       = {{Nordin, Olof}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Risky Business: An Empirical Study of Leverage and High-Yield Credit Spreads}},
  year         = {{2024}},
}