Floating-Fixed Credit Spreads
by Darrell Duffie of Stanford University, and
Abstract: We study the term structure of yield spreads between floating-rate and fixed-rate notes of the same credit quality and maturity. Floating-fixed spreads are theoretically characterized in some practical cases, and quantified in a simple model, in terms of maturity, credit quality, yield volatility, yield-spread volatility, correlation between changes in yield spreads and default-free yields, and other determining variables.
Published in: Financial Analysts Journal, Vol. 57, No. 3, (May/Jun 2001), pp. 76-87.