The reaction of sovereign CDS spread volatilities to news announcements

Bouzgarrou, Houssam; Chebbi, Tarek

doi:10.1057/jam.2016.20

Cited by 4 publications

(2 citation statements)

References 49 publications

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“…While this may seem small in some scenarios, it is not uncommon when taking a look at related literature that analyzes CDS spreads at the daily level. Bouzgarrou and Chebbi (2016) report an R 2 of 13.4% in the context of sovereign CDS, with a smaller number of entities and a shorter observation period. While there are differences in the study design, the R 2 of Liebmann et al ( 2016) is on a comparable scale.…”

Section: Resultsmentioning

confidence: 85%

Utilizing News Topics for Credit Risk Management: The Explanation of Bank CDS Spreads

Roeder

Palmér

Muntermann

2020

Journal of Decision Systems

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Monitoring the default risk of banks is highly relevant for companies when they enter into derivative contracts with banks to hedge risks. These contracts are subject to the counterparty risk of the bank defaulting. In credit risk management, market-based measures such as credit default swap (CDS) spreads are used to continuously assess the credit risk of counterparties. At the same time, CDS spreads are difficult to interpret and explain. We investigate which financial news topics are positively or negatively related to bank CDS spreads. Our findings indicate that especially negative news topics are significantly associated with changes in CDS spreads. These include not only financial aspects such as a decrease in dividends or revenue guidance but also nonfinancial topics such as sanctions and legal issues. Thereby, our understanding of which topics addressed in financial news are relevant for supporting decision-making in the context of credit risk management is improved.

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Section: Resultsmentioning

confidence: 85%

Utilizing News Topics for Credit Risk Management: The Explanation of Bank CDS Spreads

Roeder

Palmér

Muntermann

2020

Journal of Decision Systems

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“…For the purpose of the analysis, following Andres et al [17] and Bouzgarrou and Chebbi [18], we define the daily relative spread changes as…”

Section: Cds Spread Patterns and Changesmentioning

confidence: 99%

Sovereign CDS Premiums’ Reaction to Macroeconomic News: An Empirical Investigation

Passariello

Wang

2021

Complexity

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We assess the efficiency of the sovereign credit default swap (CDS) market by investigating how sovereign CDS spreads react to macroeconomic news announcements. Contrary to the vast majority of the existing literature, one of our main findings supports the hypothesis that news announcements reduce market uncertainty and, thus, that both better- and worse-than-expected news lower CDS prices during our sample period. In addition, we find that CDS spreads respond differently to the four macroindicators across the three different regions. Our findings might help investors in these areas to interpret the surprises of macronews announcements when making decisions in CDS markets.

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Rating Announcements, CDS Spread and Volatility During the European Sovereign Crisis

Raimbourg

Salvadè

2021

Finance Research Letters

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The reaction of sovereign CDS spread volatilities to news announcements

Cited by 4 publications

References 49 publications

Utilizing News Topics for Credit Risk Management: The Explanation of Bank CDS Spreads

Utilizing News Topics for Credit Risk Management: The Explanation of Bank CDS Spreads

Sovereign CDS Premiums’ Reaction to Macroeconomic News: An Empirical Investigation

Rating Announcements, CDS Spread and Volatility During the European Sovereign Crisis

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