Risk Aversion and Risk Premia in the CDS Market
Jeffery D. Amato
Goldman Sachs International
December 1, 2005
BIS Quarterly Review, December 2005
Abstract:
Credit default swap (CDS) spreads compensate investors for expected loss, but they also contain risk premia because of investors’ aversion to default risk. We estimate CDS risk premia and default risk aversion to have been highly volatile during 2002-2005. Both measures appear to be related to fundamental macroeconomic factors, such as the stance of monetary policy, and technical market factors, such as issuance of collateralised debt obligations.
Number of Pages in PDF File: 14
JEL Classification: G120, G130, G140
Accepted Paper Series
Suggested Citation
Amato, Jeffery D., Risk Aversion and Risk Premia in the CDS Market (December 1, 2005). BIS Quarterly Review, December 2005. Available at SSRN: http://ssrn.com/abstract=1645856
