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Test of the relationship between five-year CDS spreads and five-year bond yields using the assumption that the risk-free rate is 7) the Treasury rate, 77, and ii) the swap rate, rs. The CDS spread and all rates are measured in percentage points. Standard errors are shown in parentheses.

Table 2 Test of the relationship between five-year CDS spreads and five-year bond yields using the assumption that the risk-free rate is 7) the Treasury rate, 77, and ii) the swap rate, rs. The CDS spread and all rates are measured in percentage points. Standard errors are shown in parentheses.

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List of the reference entities included in the analysis in Section II.
List of the reference entities included in the analysis in Section II.
Comparison of implied risk-free rate, r, with the corresponding Treasury rate, r7, and the corresponding swap rate, rs. The implied risk-free rate is about 63 basis points higher than the Treasury rate and about 6 basis points lower than the swap rate. The variable O is the fraction of the distance from the Treasury rate to the swap rate at which the implied risk-free rate is found.
Comparison of implied risk-free rate, r, with the corresponding Treasury rate, r7, and the corresponding swap rate, rs. The implied risk-free rate is about 63 basis points higher than the Treasury rate and about 6 basis points lower than the swap rate. The variable O is the fraction of the distance from the Treasury rate to the swap rate at which the implied risk-free rate is found.
Related topics:
Applied MathematicsCredit RatingCredit RatingsCredit Default Swaps
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