Lower Bound on Credit Spreads
Document ID: 2005-81 (previously 2005/006)
Published on: 1st July 2005
Author: Steven Morrison
Credit spreads being produced by the ESG appear to be bounded below i.e. there is a minimum spread that is higher than zero. Credit spreads over any finite time-interval are non-zero because, loosely speaking, they are assumed to mean-revert towards some assumed mean value.
