Abstract
We use a hierarchical factor model to study the behavior of yield curves derived from the market prices of corporate bonds issued by industrial companies and traded in the U.S. market. The sample is comprised by curves of different risk levels, which allows identifying four global forces and interpreting some of them as manifestations of flight to quality. The main contributions of this paper are detecting movements that can be assigned to flight to quality through a hierarchical factor model, an econometric tool not yet used in empirical studies about the phenomenon, and adding new insights to the literature about the driving factors of corporate curves.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
