Relationships between Financial Sectors’ CDS Spreads and Other Gauges of Risk: Did the Great Recession Change Them?

Hammoudeh, Shawkat; Bhar, Ramaprasad; Liu, Tengdong

doi:10.2139/ssrn.1923968

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2019

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(2 citation statements)

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“…Norden and Weber (2009) examine the co-movements among stock, bond, and CDS markets, and find that CDS spread is sensitive to stock market information. Hammoudeh, Bhar, and Liu (2013) study the CDS indices of three financial sectors (i.e. banking, financial services, and insurance sectors), and find these three indices are interrelated to each other, leading to the risk of contagion across these sectors.…”

Section: Introductionmentioning

confidence: 99%

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Slow- and fast-moving information content of CDS spreads: new endogenous systematic factors

Lin

Kolokolova

Poon

2019

The European Journal of Finance

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This paper proposes two new Credit Default Swap (CDS) endogenous systematic factors constructed from peer-CDS information. The factors capture slow-moving credit risk information, as well as fast-moving newly arrived market information embedded in the most recent CDS quotes. Using a sample of U.S. non-financial listed firms from 2002 to 2011, we find that these two endogenous systematic factors dominate firm-specific factors and other widely known systematic factors in insample and out-of-sample CDS spread predictions.

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Section: Introductionmentioning

confidence: 99%

“…All these studies also suggest the existence of some systematic pricing factors for CDS spreads that are endogenously embedded in these related markets. The focus of Hammoudeh, Bhar, and Liu (2013) is on financial sector CDS indices; our study covers individual CDS spreads of non-financial firms.…”

Section: Introductionmentioning

confidence: 99%