DOI: 10.1002/fut.22505 ISSN: 0270-7314

Corporate credit default swap systematic factors

Ka Kei Chan, Ming‐Tsung Lin, Qinye Lu
  • Economics and Econometrics
  • Finance
  • General Business, Management and Accounting
  • Accounting

Abstract

We examine a comprehensive set of systematic and firm‐specific determinants of the credit default swap (CDS), using a two‐step approach to explore the factor's effect on CDS spread changes. We show that systematic factors are important and account for the most changes in the CDS spreads (with average of 35%), while firm‐specific factors are limited (with of 5% in panel regression) with only 4 out of 28 firm‐specific factors being significant. It implies that the systematic factors are overlooked in the literature, and they can provide many implications for practitioners in CDS pricing and the firm's credit risk management.

More from our Archive