The determinants of CDS spreads: evidence from the model space

Publikation: Beiträge in ZeitschriftenZeitschriftenaufsätzeForschungbegutachtet

Authors

We apply Bayesian model averaging and a frequentistic model space analysis to assess the pricing determinants of credit default swaps (CDSs). Our study focuses on the complete model space of plausible models and thus supports ultimate robustness. Using a large dataset of CDS contracts we find that CDS price dynamics can be mainly explained by factors describing firms’ sensitivity to extreme market movements. More precisely, our results suggest that dynamic copula based measures of tail dependence incorporate most essential pricing information, making other potential determinants such as Merton-type factors or linear variables measuring the systematic market evolution negligible.

OriginalspracheEnglisch
ZeitschriftReview of Derivatives Research
Jahrgang21
Ausgabenummer1
Seiten (von - bis)63-118
Anzahl der Seiten56
ISSN1380-6645
DOIs
PublikationsstatusErschienen - 01.04.2018

Zugehörige Projekte

  • Modellierung von Abhängigkeitsstrukturen

    Projekt: Forschung

DOI