What drives corporate CDS spreads? A comparison across US, UK and EU firms

Sorwar, G, Pereira, J and Nurullah, M 2018, 'What drives corporate CDS spreads? A comparison across US, UK and EU firms' , Journal of International Financial Markets, Institutions and Money .

[img] PDF - Accepted Version
Restricted to Repository staff only until 15 February 2019.

Download (712kB) | Request a copy

Abstract

We investigate the determinants of corporate credit default swap spreads for US, UK and EU firms and decompose the predictive power of accounting- and market-based variables for spreads in pre-crisis, crisis and post-crisis periods. We find that the predictive power of accounting risk measures decreases during and following the crisis, and the growing relevance of market-based variables highlights the growing significance of forward-looking risk measures for modeling spreads. By decomposing bond yield spreads into default and non-default components, we find a significant non-zero basis in the post-crisis period, highlighting the mispricing between the two markets. We find that mispricing between the two markets has significant predictive power in forecasting subsequent price movement in the CDS market in the post-crisis period.

Item Type: Article
Schools: Schools > Salford Business School
Journal or Publication Title: Journal of International Financial Markets, Institutions and Money
Publisher: Elsevier
ISSN: 1042-4431
Related URLs:
Depositing User: G Sorwar
Date Deposited: 14 Feb 2018 15:47
Last Modified: 15 Feb 2018 15:02
URI: http://usir.salford.ac.uk/id/eprint/45233

Actions (login required)

Edit record (repository staff only) Edit record (repository staff only)

Downloads

Downloads per month over past year