The Determinants of the Nordic High Yield Corporate Bond Spread

Abstract

This thesis examines the pricing in the Nordic High Yield Corporate Bond markets. I analyse the yield spreads with a structural Merton model to estimate the default risk component of the spread. The derived default risk spread is then subtracted from the actual spread to isolate the non-default risk component. Using an Ordinary Least Squares regressions, I analyze the remaining spread, incorporating various factors identified in the literature that influence the credit spreads. The results indicate that the Nordic highyield corporate bond market offers a significant premium, with key determinants including bond duration, trustee presence, and debt structure.