金融与财务学系系列讲座之324期

Time：14:00-15:30, Tuesday, Sep 23, 2025

Location: Room 603, Starr Building（史带楼603室）

Topic: Yield Curve Arbitrage in the Credit Market

Speaker: Zhan Shi 施展

Tsinghua University 

Abstract: We design a novel relative-value strategy that exploits mispricing in the corporate bond market by extending yield curve arbitrage to individual issuers. A significant challenge is that most firms have too few bonds outstanding to reliably estimate an issuer-specific yield curve. We develop a semi-parametric estimation method that overcomes this sparsity by incorporating information from bonds of comparable firms. This approach produces accurate yield curves for 85% of U.S. issuers, a substantial increase in coverage over existing methods. The difference between a bond’s market yield and its model-implied yield—our relative value (RV) signal—predicts future returns. A portfolio that longs high-RV bonds and shorts low-RV bonds earns significant abnormal returns that are not explained by established risk factors or subsumed by other documented value strategies. These returns survive transaction costs and are pronounced among bonds with high arbitrage risk, greater illiquidity, and during periods of heightened intermediary funding constraints. The evidence suggests that the RV signal captures mispricing rather than compensation for systematic risk.

Bio: Shi Zhan is currently an Associate Professor at PBC School of Finance, Tsinghua University. Zhan received his Ph.D. in Finance from The Pennsylvania State University in 2014. Before that, he earned his B.S. in Statistics from Fudan University in 2008. In addition, he also worked as a Visiting Assistant Professor of Finance in The Ohio State University. His research interests include Fixed Income, Market Microstructure, Dynamic Corporate Finance, FinTech. His work on time-varying ambiguity has won 2104 WFA Cubist Systematic  Strategies Ph.D. Candidate Award. His work has been published in JF, JFE, MS, RF, 经济研究, 金融研究, etc. He was awarded the “Excellent Young Scholars" from the National Natural Science Fund.