Arbeitspapier

Are Banks Different? Evidence from the CDS Market

This paper uses regression analysis to compare the market pricing of the default risk of banks to that of other firms. We study how CDS traders discriminate between banks and other type of firms and how their judgement changes over time, in particular, since the start of the recent financial turmoil. We use monthly data on the Credit Default Swaps (CDS) of 41 major banks and 162 non-banks. By means of panel analysis, we decompose the CDS premia into the expected loss and the risk premium. Our primary result is that market participants indeed viewed banks differently and that they drastically changed their mind during the recent turmoil that started in August 2007.

Language
Englisch

Bibliographic citation
Series: Working Paper ; No. 152

Classification
Wirtschaft
Interest Rates: Determination, Term Structure, and Effects
Asset Pricing; Trading Volume; Bond Interest Rates
Contingent Pricing; Futures Pricing; option pricing
Subject
Credit default swap
market discipline
default risk
risk premium

Event
Geistige Schöpfung
(who)
Raunig, Burkhard
Scheicher, Martin
Event
Veröffentlichung
(who)
Oesterreichische Nationalbank (OeNB)
(where)
Vienna
(when)
2009

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Raunig, Burkhard
  • Scheicher, Martin
  • Oesterreichische Nationalbank (OeNB)

Time of origin

  • 2009

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