Risky Business: An Empirical Study of Leverage and High-Yield Credit Spreads
(2024) NEKH02 20241Department 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:
http://lup.lub.lu.se/student-papers/record/9156977
- author
- Nordin, Olof LU
- supervisor
- organization
- course
- NEKH02 20241
- year
- 2024
- 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}}, }