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Publication Detailed Description
Journal Title
European Financial Management
Year (definitive publication)
2015
Language
English
Country
United Kingdom
More Information
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Abstract
We study the empirical determinants of Credit Default Swap (CDS) spreads through quantile regressions. In addition to traditional variables, such as implied volatility, put skew, historical stock return, leverage, profitability, and ratings, the results indicate that CDS premiums are strongly determined by CDS illiquidity costs, measured by absolute bid-ask spreads. The quantile regression approach reveals that high-risk firms are more sensitive to changes in the explanatory variables that low-risk firms. Furthermore, the goodness-of-fit of the model increases with CDS premiums, which is consistent with the credit spread puzzle.
Acknowledgements
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Keywords
Credit default swap,Credit risk,Liquidity,Quantile regression
Fields of Science and Technology Classification
- Economics and Business - Social Sciences
Funding Records
| Funding Reference | Funding Entity |
|---|---|
| PTDC/EGE-GES/119274/2010 | Fundação para a Ciência e a Tecnologia |
| UID/GES/00315/2013 | Fundação para a Ciência e a Tecnologia |
