Determinants of Credit Default Swaps in International Markets

Networks Financial Institute Working Paper No. 2011-WP-01

30 Pages Posted: 1 Mar 2011

See all articles by M. Kabir Hassan

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Thiti S. Ngow

affiliation not provided to SSRN

Jung-Suk Yu

School of Urban Planning & Real Estate Studies, Dankook University

Date Written: February 1, 2011

Abstract

This paper reexamines the determinants of credit default swaps (CDS) spreads in the U.S., Europe, and Asia-Pacific markets with a new data set using linear regressions. These determinants are categorized into two groups: firm level and macroeconomic variables. We also include two non-traditional moment risk variables in the analysis as we suspect that these measures may capture the effects of possible extreme downside risk, or extreme negative scenarios, in the underlying credit valuation process. Our findings from the U.S. and abroad confirm the existing evidence on the significant relationship between theoretical determinants of default risk and actual market pricing of CDS. Also, we provide additional evidence on the importance of the interaction between macroeconomic and firm-specific variables, which is common throughout the world.

Keywords: Credit default swaps, credit risk, credit default swaps spreads, market conditions

JEL Classification: C13, E43, G15

Suggested Citation

Hassan, M. Kabir and Ngow, Thiti S. and Yu, Jung-Suk, Determinants of Credit Default Swaps in International Markets (February 1, 2011). Networks Financial Institute Working Paper No. 2011-WP-01, Available at SSRN: https://ssrn.com/abstract=1769930 or http://dx.doi.org/10.2139/ssrn.1769930

M. Kabir Hassan (Contact Author)

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Thiti S. Ngow

affiliation not provided to SSRN ( email )

Jung-Suk Yu

School of Urban Planning & Real Estate Studies, Dankook University ( email )

152, Jukjeon-ro, Suji-gu, Yongin-si
Gyeonggi-do, 16890
Korea, Republic of (South Korea)

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