scholarly journals Short-Term Determinants of the Idiosyncratic Sovereign Risk Premium: A Regime-Dependent Analysis for European Credit Default Swaps

2014 ◽  
Author(s):  
Giovanni Calice ◽  
Rong Hui Miao ◽  
Filip Sterba ◽  
Borek Vasicek
Keyword(s):  
Risk Premium ◽  
Credit Default Swaps ◽  
Sovereign Risk ◽  
Short Term ◽  
Credit Default

Multidimensional Assessment of Economies by the Level of Sovereign Risk Premium

2020 ◽  
Vol 2020 (2) ◽  
pp. 3-27
Author(s):  
Sergey Drobyshevsky ◽  
Pavel Trunin ◽  
Lyudmila Gadiy ◽  
Mariya Chembulatova
Keyword(s):  
Monetary Policy ◽  
Risk Premium ◽  
International Market ◽  
Developed Countries ◽  
Credit Default Swaps ◽  
Sovereign Risk ◽  
Political Risks ◽  
Credit Default ◽  
Monetary Authorities

The analysis of the international market for credit default swaps (CDS) shows that the interdependence of sovereign CDS spreads is increasing and the market remains segmented. However, the reduction in the variation of sovereign CDS spreads means increased competition for capital and should be taken into account by monetary authorities of developed countries when they tighten monetary policy. The article shows a significant role of political risks in determining the level of sovereign risk.

scholarly journals Determinants of credit default swaps implied ratings during the crisis: was sovereign risk mispriced?

2018 ◽  
Vol 15 (3) ◽  
pp. 1-14
Author(s):  
Maria Alberta Oliveira ◽  
Carlos Santos
Keyword(s):  
Risk Premium ◽  
Probit Model ◽  
Credit Default Swaps ◽  
Matching Theory ◽  
Model Specification ◽  
Sovereign Risk ◽  
Global Risk ◽  
Varying Coefficients ◽  
Credit Default ◽  
The Impact

This paper addresses the question of whether sovereign risk pricing was related to macroeconomic fundamentals, between 2007 and 2015, in a sample of OECD countries. The authors argue that the conflicting evidence in the literature is due to poor methodology options. The researchers innovate by modelling sovereign credit default swaps implied ratings as our sovereign risk proxy, instead of spreads, avoiding common pitfalls. Furthermore, the authors improve the variable selection, model specification and the econometric procedures used. A panel ordered probit model is chosen, assuring robust inference. The authors relax the parallel lines assumption, allowing for rating-varying coefficients of explanatory variables. The result is the first congruent model of sovereign risk during the years of the financial crisis and of the Euro Area crisis. Fiscal space variables, economic activity indicators, variables pertaining to external imbalances, and contagion proxies are relevant, with effects matching theory priors. The scientists clarify conundrums in the previous literature, posed by lack of significance of some macro fundamentals and by puzzling signs of some estimated coefficients. Moreover, this is the first paper to estimate not only the global risk premium, but also the impact of changing risk aversion. The authors find no support for claims of sovereign risk mispricing during the sample period. The results allow relevant policy conclusions, namely concerning the validity of different fiscal consolidation paths in financially distressed countries.

scholarly journals ANALYSIS OF LITHUANIAN CREDIT DEFAULT SWAPS

2015 ◽  
Vol 16 (5) ◽  
pp. 916-930 ◽  
Author(s):  
Arvydas Kregzde ◽  
Gediminas Murauskas
Keyword(s):  
Risk Premium ◽  
Sovereign Debt ◽  
Price Discovery ◽  
Credit Default Swaps ◽  
Bond Market ◽  
East Europe ◽  
Leading Role ◽  
Credit Default ◽  
Yield Risk ◽  
The Government

This paper studies international sovereign Credit Default Swaps (CDS) market focusing attention to the CDS of Central and East Europe. The main purpose of the study was to perform detail analysis of Lithuanian CDS in the global capital market. We compared the CDS markets of other countries and found some commonalities between them. We study the credit curve produced by CDS and volatility of CDS. A great attention is paid to investigate the relationship of CDS and the government bond market. Analysis of finding a leading role of CDS and the bond markets in the price discovering process is made. A leading market for different periods is found by using the Vector Error Correction model. Our main finding is that during the volatile period price discovery takes place in the bond market and in the calm period price discovery is observed in the CDS market. Disclosed relationship between CDS spreads and Eurobonds yield risk premium gives an additional decision making tool for sovereign debt managers.

scholarly journals Sovereign risk and the pricing of corporate credit default swaps

2015 ◽  
Vol 11 (1) ◽  
pp. 1-27 ◽  
Author(s):  
Matthias Haerri ◽  
Stefan Morkoetter ◽  
Simone Westerfeld
Keyword(s):  
Credit Default Swaps ◽  
Sovereign Risk ◽  
Corporate Credit ◽  
Credit Default

scholarly journals Sovereign Risk and the Pricing of Corporate Credit Default Swaps

2014 ◽  
Author(s):  
Matthias Haerri ◽  
Stefan Morkoetter ◽  
Simone Westerfeld
Keyword(s):  
Credit Default Swaps ◽  
Sovereign Risk ◽  
Corporate Credit ◽  
Credit Default

scholarly journals Empirical Evidence of Co-Movement between the Canadian CDS, Stock Market And TSX 60 Volatility Index

2020 ◽  
Vol 3 (3) ◽  
pp. 51-64
Author(s):  
Ramzan Ali ◽  
Usman Ullah Butt ◽  
Muhammad Musa Khan ◽  
Muhammad Shaheer ◽  
Farhan Abbas Zaidi
Keyword(s):  
Stock Market ◽  
Credit Default Swaps ◽  
Medium Term ◽  
Short Term ◽  
Volatility Index ◽  
Daily Data ◽  
Credit Default ◽  
Long Time ◽  
Prime Objective

Purpose- The prime objective of this study was to find the co-movement between the Canadian credit default swaps market, the Stock market and volatility index (TSX 60 Index) Design/ Methodology- To achieve this purpose, daily data containing 2870 observations starting from the 1st of January 2009 to the 30th of December 2019 were analyzed. This study employed the wavelet approach to present results in short-term, medium-term, long-term, and very long time. Findings- The findings of this study showed a negative correlation between the CDS market, stock market, and the TSX 60 index in the short-term as well as in the long-term term, while in medium-term and very long-term period correlation is strongly positive. The wavelet co-movement results in the short-term and long-term were negative, while this relationship in the medium-term and very long-term period was strongly positive. Practical Implications- This research provides simultaneous valuable information for investment decisions in the short, medium, and long term time horizons, as well as for the policymakers in the Canadian credit default swaps market, stock market, and the volatility index (TSX 60 Index).

scholarly journals The Interdependence of Debt and Innovation Sustainability: Evidence from the Onset of Credit Default Swaps

2019 ◽  
Vol 11 (10) ◽  
pp. 2946
Author(s):  
Yixin Chen ◽  
Junrui Zhang
Keyword(s):  
Risk Taking ◽  
Stock Price ◽  
Negative Impact ◽  
Price Volatility ◽  
Credit Default Swaps ◽  
Short Term ◽  
Credit Default ◽  
Early Failures ◽  
Sustainable Financing

Innovation sustainability requires sustainable financing. Extensive research suggests that debt is a disfavored source of innovation financing. In this study, we show that a recent financial development, credit default swaps (CDSs), may change the institutional logics of debt, making debt useful to the financing innovation. To be specific, we find that with CDS protection, creditors become less concerned with a borrowing firm’s credit risk and risk taking, making debt tolerant of early failures and reducing the negative impact of debt on the process of Innovation. In addition, we find that the availability of CDSs is more likely to change the nature of long-term debt than that of short-term debt, making long-term debt a useful instrument for the financing of innovation. Finally, the mitigation effect of CDS on the relation between debt and innovation is more pronounced for CDS firms with higher pay sensitivity to stock price volatility (Vega) and less financial constraints, revealing that a CEO’s incentive, rather than the relaxed financing constraints, is the underlying channel for the reduced negative impact of debt on innovation after CDS trading.

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