Real Economic Shocks and Sovereign Credit Risk

Augustin, Patrick; Tedongap, Roméo

doi:10.1017/s0022109016000259

Cited by 89 publications

(29 citation statements)

References 75 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Ang and Longstaff () also stress the significant negative relation of U.S. systemic risk with the VIX. In a broader study, Augustin and Tedongap () use data for 38 countries to relate economic shocks to CDS spreads comovements. They show that U.S. growth and consumption volatility are strongly associated with the variation in the first two principal components of the term structure of CDS spreads.…”

Section: Previous Literature and Research Questionsmentioning

confidence: 99%

“…Pan and Singleton () also show a strong association of the spreads of Mexico, Turkey, and Korea with the VIX. Other studies in the same strand of the literature discussing the importance of global determinants of sovereign spreads are those by Ang and Longstaff (); Augustin and Tedongap (); Aizenman, Hutchison and Jinjarak (); Fender, Hayo and Neuenkirch (); and others.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The Drivers of Sovereign CDS Spread Changes: Local Versus Global Factors

Hibbert

Pavlova

2017

The Financial Review

View full text Add to dashboard Cite

We use daily data for a panel of 34 countries to investigate regional differences in sovereign credit default swaps (CDS) spread determinants and the significance of local versus global market factors. Similar to prior studies, we find a high level of commonality among CDS spreads, but our results show that this effect is stronger in Latin American CDS. The results of our quantile panel regression model show that although global forces drive spreads across the conditional distribution, changes in credit ratings are significant in explaining CDS spreads only in the upper quantiles. We also confirm the existence of regional differences in spread determinants.

show abstract

Section: Previous Literature and Research Questionsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The Drivers of Sovereign CDS Spread Changes: Local Versus Global Factors

Hibbert

Pavlova

2017

The Financial Review

View full text Add to dashboard Cite

show abstract

“…Additionally, Liu and Miao (2014) focus on the productionbased asset pricing with GDA preferences. Augustin and Tedongap (2016) further shed light on the role of GDA preferences in explaining sovereign credit spreads. Recently, Delikouras (2017) employ disappointment aversion to explain the cross-section of expected returns.…”

Section: Introductionmentioning

confidence: 90%

Generalized Disappointment Aversion, Learning, and Asset Prices

Babiak

2017

SSRN Journal

View full text Add to dashboard Cite

ISBN 978-80-7343-413-7 (Univerzita Karlova, Centrum pro ekonomický výzkum a doktorské studium) ISBN 978-80-7344-449-5 (Národohospodářský ústav AV ČR, v. v. i.) AbstractThis paper provides a generalized disappointment aversion (GDA) interpretation of the variance and skew risk premia in equity returns and the volatility skew in equity index options. The key ingredients are Bayesian learning about a hidden consumption growth rate and the investor's tail aversion induced by GDA preferences which amplify the impact of consumption shocks. This model with disappointment risk reproduces salient properties of the variance and skew risk premia and generates a realistic volatility skew implied by index options, while simultaneously matching the mean and volatility of risk-free rate and equity returns, and the level of the price-dividend ratio. Additionally, the time-varying probability of disappointment events generates a wide range of dynamic asset pricing phenomena.

show abstract

“…The results are available upon request. 5 If transaction costs (inventory costs, order handling costs, and search costs) can be assumed to be constant across markets, differences should not exist between our aggregate-level and market-level regression results. 6 Only firm leverage is included in their regressions.…”

Section: Firm Performancementioning

confidence: 95%

Determinants of Credit Default Swap Spreads: A Four-Market Panel Data Analysis

Li¹,

Fung²

2017

JFE

View full text Add to dashboard Cite

This paper attempts to elucidate whether firm performance and macroeconomic conditions play a significant role in explaining credit default swap (CDS) spreads. Our panel dataset covers 112 reference entities in four markets (South Korea, Hong Kong, France, and Germany) for the period 2001-12. Overall, our results suggest that market value indicators (Tobin's Q, stock market returns, and the interest rate) appear to be more important than book value indicators (i.e., ROA, ROE, and the GDP growth rate) in determining CDS spreads. Moreover, Asian CDS markets are shown to be more sensitive to both GDP and stock market volatility, than the two European markets. Finally, the 2007-09 global financial crisis may have significantly affected the CDS market as a whole, but it generally did not affect the individual markets. These results are robust to various model specifications. This paper contributes to the understanding of CDS determinants at firm-, economy-, and market-level. JEL classifications: G10, G15, G32

show abstract

Real Economic Shocks and Sovereign Credit Risk

Cited by 89 publications

References 75 publications

The Drivers of Sovereign CDS Spread Changes: Local Versus Global Factors

The Drivers of Sovereign CDS Spread Changes: Local Versus Global Factors

Generalized Disappointment Aversion, Learning, and Asset Prices

Determinants of Credit Default Swap Spreads: A Four-Market Panel Data Analysis

Contact Info

Product

Resources

About