Abstract

http://ssrn.com/abstract=1719287
 
 

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An Empirical Analysis of the Dynamic Dependences in the European Corporate Credit Markets: Bonds vs. Credit Derivatives


Sergio Mayordomo


University of Navarra - School of Economics and Business Administration

Juan Ignacio Peña


Universidad Carlos III de Madrid - Department of Business Administration

November 12, 2012


Abstract:     
This paper provides new evidence on the dynamic dependences of European corporate credit spread in three markets: Bond, Credit Default Swap (CDS), and Asset Swap (ASP). Using daily data from 2005 to 2009, we find that credit spread returns are primarily driven by innovations. The intra-market dependence during the current crisis decreases for bond and ASP innovations but increases for CDS due to the increase of counterparty risk. ASP and bond innovations are closely related suggesting that the cash component (bond) dominates the ASP innovations’ behavior. On the other hand, CDS’s innovations are unrelated to the bonds’ and ASP’s innovations.

Number of Pages in PDF File: 38

Keywords: Credit Spreads, Market Dynamic Dependence, DCC-GARCH

JEL Classification: C32, C51, G13, G14

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Date posted: December 4, 2010 ; Last revised: November 12, 2012

Suggested Citation

Mayordomo, Sergio and Peña, Juan Ignacio, An Empirical Analysis of the Dynamic Dependences in the European Corporate Credit Markets: Bonds vs. Credit Derivatives (November 12, 2012). Available at SSRN: http://ssrn.com/abstract=1719287 or http://dx.doi.org/10.2139/ssrn.1719287

Contact Information

Sergio Mayordomo (Contact Author)
University of Navarra - School of Economics and Business Administration ( email )
Edificio Amigos
Pamplona, Navarra 31009
Spain
HOME PAGE: http://sergiomayordomo.wordpress.com/
Juan Ignacio Peña
Universidad Carlos III de Madrid - Department of Business Administration ( email )
Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain
34 91 624 9625 (Phone)
34 91 624 9608 (Fax)
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