Forecasting credit spread volatility: Evidence from the Japanese Eurobond Market

Brock N. Johnson, Jonathan A. Batten

Research output: Contribution to journalArticlepeer-review


Different approaches to forecasting the volatility associated with the credit spreads on Yen Eurobonds are investigated. The actual volatility, historical volatility and estimated conditional volatility on spreads derived from a regression-based model with a GARCH and ARMA specification are compared within an adaptation of Black's (J. Finance, 31, 1976, 361-367) option-pricing model. Surprisingly, the regression forecast over a medium forecasting horizon suggests that historic volatility provides the better forecast. The implications of these results for volatility forecasting and credit spread modelling are also discussed.

Original languageEnglish
Pages (from-to)335-357
Number of pages23
JournalAsia-Pacific Financial Markets
Issue number4
Publication statusPublished - Aug 2005


  • Credit spreads
  • Forecasting volatility
  • Yen Eurobonds


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