TY - JOUR T1 - Modeling Credit Risk JF - The Journal of Portfolio Management SP - 90 LP - 100 DO - 10.3905/jpm.2003.319876 VL - 29 IS - 2 AU - Alec Kercheval AU - Lisa R Goldberg AU - Ludovic Breger Y1 - 2003/01/31 UR - https://pm-research.com/content/29/2/90.abstract N2 - Spreads for credit instruments denominated in euros, sterling, and U.S. dollars over their local swap curves are examined here. The findings indicate that monthly spread changes were strongly currency-dependent during the period May 1999–May 2001. Sector-by-rating factor returns are at best weakly correlated across currencies, and U.S. dollar spread returns are generally more volatile than the other two by a factor of two or three. This is contrary to what would be expected from covered interest arbitrage. The conclusion is that analysts should estimate credit factor risk models separately in each market, as risk forecasting models using a single set of spread factors for different markets will not be accurate. ER -