What Is an Earnings Credit Rate?
In practice, credit ratings are usually used to determine the default risk of different bonds. The yield spread between bonds with different credit ratings (Yield Spread) reflects the risk premium of different default risks, so it is also called credit spread. Since government bonds are often referred to as non-default risk bonds (referred to as risk-free bonds), as long as we know the yields of government bonds with different maturities, plus a moderate yield difference, we can obtain the yield of risk bonds such as corporate bonds, and further Valuation of risk bonds as a discount rate.
Yield difference
Right!
- Chinese name
- Yield difference
- Belong to
- Credit Rating
- Types of
- Default risk
- Attributes
- Bond
- In practice, credit ratings are usually used to determine the default risk of different bonds. The yield spread between bonds with different credit ratings (Yield Spread) reflects the risk premium of different default risks, so it is also called credit spread. Since government bonds are often referred to as non-default risk bonds (referred to as risk-free bonds), as long as we know the yields of government bonds with different maturities, plus a moderate yield difference, we can obtain the yield of risk bonds such as corporate bonds, and further Valuation of risk bonds as a discount rate.
- In an economic boom, the difference in yields between low-grade bonds and risk-free bonds is usually small; once they enter or are depressed, credit spreads can widen sharply, causing the price of low-grade bonds to plummet.