The purpose of this article is to examine the factors which define the changes of credit default swap (CDS) premiums, therefore, to analyse the indicator ability of CDS spreads on the credit market. The value of the ‘indicator’ of CDS spreads in the credit market has been recently highlighted due to the ‘failure’ of the rating agencies as an indicator to represent and ‘monitor’ the credit risk associate to an established reference entity. In detail, the empirical analysis is focused on a sample of 308 European corporates listed on the stock exchange holding five-year CDS spreads. The timeline considered is from 1 April 2005 to 31 March 2015, taking into account both the period pre-and post-financial crisis. Data has been elaborated from Bloomberg. The choice to analyse the European companies has been made to verify the behaviour of the determinants of CDS in a market that has very different characteristics compared to the USA (both structural and regulatory). In total period analysis, we find that both the firm variables and market variables are significant. In particularity, in post-financial crisis, only market variables are statistically significant and they have an explanatory power equal to 57 per cent.

The relevance of market variables in the CDS spread volatility: an empirical post-crisis analysis

Eliana Angelini;Elisa Di Febo
2018

Abstract

The purpose of this article is to examine the factors which define the changes of credit default swap (CDS) premiums, therefore, to analyse the indicator ability of CDS spreads on the credit market. The value of the ‘indicator’ of CDS spreads in the credit market has been recently highlighted due to the ‘failure’ of the rating agencies as an indicator to represent and ‘monitor’ the credit risk associate to an established reference entity. In detail, the empirical analysis is focused on a sample of 308 European corporates listed on the stock exchange holding five-year CDS spreads. The timeline considered is from 1 April 2005 to 31 March 2015, taking into account both the period pre-and post-financial crisis. Data has been elaborated from Bloomberg. The choice to analyse the European companies has been made to verify the behaviour of the determinants of CDS in a market that has very different characteristics compared to the USA (both structural and regulatory). In total period analysis, we find that both the firm variables and market variables are significant. In particularity, in post-financial crisis, only market variables are statistically significant and they have an explanatory power equal to 57 per cent.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11564/695807
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