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A good piece of literature on this is Colin-Dufresne et al. (2001), "The Determinants of Credit Spread Changes", Journal of Finance, 56, 2177-2207. I think differencing all variables is a good idea in this case. Not only because of stationarity concerns but also because of unobserved time-invariant issuer-level characteristics. I do not see the case for a ...


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Essentially the market splits this discounting into 2 parts; risk-free discounting and credit risk. Take a market IRS in USD; it will fix on USD Libor (fixed in London). But Libor is a measure of unsecured interbank lending, and a standard IRS contract these days is cash collateralised and daily margined, so Libor isn't really a good fit, so the ...



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