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In Rememberance: World Trade Center (WTC)

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Floating-Fixed Credit Spreads

by Darrell Duffie of Stanford University, and
Jun Liu of Stanford University

May/June 2001

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.

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