Artikel
Spread Risk Premia in Corporate Credit Default Swap Markets
The spread risk premium component of credit default swap (CDS) spreads represents a compensation demanded by protection sellers for future changes in CDS spreads caused by unpredictable fluctuations in the reference entity"s risk-neutral default intensity. This paper defines and estimates a measure of the spread risk premium component in CDS spreads of a sample of European investment-grade firms by using a stochastic intensity credit model. Our results show that, on average, investors demand a positive premium for such mark-to-market risks. After controlling for CDS market conditions, like liquidity and supply/demand effects, a panel data analysis of the estimated spread risk premia reveals a positive impact of event risk captured by the overall stock market volatility and a negative impact of investors" appetite for exposure to credit markets as reflected by the overall CDS market.
- Language
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Englisch
- Bibliographic citation
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Journal: Credit and Capital Markets – Kredit und Kapital ; ISSN: 2199-1235 ; Volume: 47 ; Year: 2014 ; Issue: 4 ; Pages: 571-610
- Classification
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Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Contingent Pricing; Futures Pricing; option pricing
International Financial Markets
- Subject
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credit default swap
spread risk premium
mark-to-market risk premium
stochastic intensity model
- Event
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Geistige Schöpfung
- (who)
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Entrop, Oliver
Schiemert, Richard
Wilkens, Marco
- Event
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Veröffentlichung
- (who)
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Duncker & Humblot
- (where)
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Berlin
- (when)
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2014
- DOI
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doi:10.3790/ccm.47.4.571
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Entrop, Oliver
- Schiemert, Richard
- Wilkens, Marco
- Duncker & Humblot
Time of origin
- 2014