Across-the-Curve Credit Spread Indices

14 Pages Posted: 31 Jul 2020

See all articles by Antje Berndt

Antje Berndt

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Applied Statistics

Darrell Duffie

Stanford University - Graduate School of Business; National Bureau of Economic Research (NBER)

Yichao Zhu

Australian National University (ANU), Research school of Finance, Actuarial Studies and Applied Statistics

Date Written: July 23, 2020

Abstract

This note presents a preliminary approach to the design of an across-the-curve credit spread index (AXI). The index is a measure of the recent average cost of wholesale unsecured debt funding for publicly listed U.S. bank holding companies and their commercial banking subsidiaries. This may be a useful benchmark for bank lending and related derivatives risk management applications. The index is a weighted average of credit spreads for unsecured debt instruments with maturities ranging from overnight to five years, with weights that reflect both transactions volumes and issuance volumes. We provide preliminary illustrative output of the bond-based component of AXI using TRACE secondary-market price and volume data from 2002–2019. We have only extremely preliminary estimates of the short-maturity (money-market) spread component.

Suggested Citation

Berndt, Antje and Duffie, James Darrell and Zhu, Yichao, Across-the-Curve Credit Spread Indices (July 23, 2020). Stanford University Graduate School of Business Research Paper No. 3884, Available at SSRN: https://ssrn.com/abstract=3662770 or http://dx.doi.org/10.2139/ssrn.3662770

Antje Berndt

Australian National University (ANU) - Research School of Finance, Actuarial Studies and Applied Statistics ( email )

Canberra, ACT 0200
Australia

HOME PAGE: http://www.cbe.anu.edu.au/about/staff-directory/?profile=Antje-Berndt

James Darrell Duffie (Contact Author)

Stanford University - Graduate School of Business ( email )

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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Yichao Zhu

Australian National University (ANU), Research school of Finance, Actuarial Studies and Applied Statistics ( email )

Kingsley Street
Acton
Australia

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