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

Lin, Ming-Tsung and Kolokolova, Olga and Poon, Ser-Huang (2019) 'Slow- and fast-moving information content of CDS spreads: new endogenous systematic factors.' The European Journal of Finance. ISSN 1351-847X

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Abstract

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 in-sample and out-of-sample CDS spread predictions.

Item Type: Article
Uncontrolled Keywords: CDS spread, credit risk, liquidity risk, systematic factors
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 06 Nov 2019 11:02
Last Modified: 23 Mar 2021 02:00
URI: http://repository.essex.ac.uk/id/eprint/25817

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