Macro risk factors of credit default swap indices in a regime-switching framework

Chan, Kam Fong; Marsden, Alastair

doi:10.1016/j.intfin.2014.01.002

Cited by 41 publications

(22 citation statements)

References 45 publications

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“…The Implied Volatility on the CBOE Index (VIX) exerts strong positive significance on Japanese Sovereign CDS spreads in both regimes. earlier findings (as in Chan and Marsden [19]; Alexander and Kaeck [17]) who find a positive relationship between VIX and CDS Indexes. Though the VIX show a positive impact on CDS spreads in the less volatile regime, the significance reduces to a 1% level and magnitude of the coefficient reduces as compared to the volatile regime.…”

Section: Resultssupporting

confidence: 55%

“…Again Employing a Markov Switching Model, Chan and Marsden [19], using a set of firm level, economy wide and theoretical determinants on North American investment grade and high yield Credit default swap indices, make a number of important findings. First, during both volatile and tranquil periods, spreads have a positive relationship with the market wide default premium, VIX and Treasury bond yield, the underlying stock market returns and Fama-French's High-Minus-Low factor loading are all negatively related to the spreads.…”

Section: Literature Reviewmentioning

confidence: 99%

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Regime Switching Determinants of the Japanese Sovereign Credit Default Swaps Spreads

Ofori¹

2015

IJTEF

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Section: Resultssupporting

confidence: 55%

Section: Literature Reviewmentioning

confidence: 99%

Regime Switching Determinants of the Japanese Sovereign Credit Default Swaps Spreads

Ofori¹

2015

IJTEF

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“…Especially, they find improved explanatory power of structural variables in the volatile regime. Chan and Marsden (2014) resort to Markov switching models as well. They use a prolonged period (2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011) which includes the financial crisis.…”

Section: Literaturementioning

confidence: 99%

The Role of a Changing Market Environment for Credit Default Swap Pricing

Leppin

Reitz

2016

Int. J. Fin. Econ.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper investigates the impact of a changing market environment on the pricing of CDS spreads written on debt from EURO STOXX 50 firms. A Panel Smooth Transition Regression reveals that parameter estimates of standard CDS fundamentals are time-varying depending on current values of a set of variables such as the ECB's systemic stress composite index, the Sentix index for current and future economic situation, and the VStoxx. These variables describe the market's transition between different regimes thereby reflecting the impact of substantial swings in agents' risk perception on CDS spreads. Overall, our results confirm the importance of nonlinearities in the pricing of risk derivatives during tranquil and turbulent times.

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“…Another study employing CDS index data is by Chan and Marsden [2014]. They investigate the macro risk factors affecting daily CDS spreads and find that factor loadings are different during crisis periods.…”

Section: Credit Spreads Term Structure and Stock Market Variablesmentioning

confidence: 99%