Year: 2014
Author: Entrop, Oliver, Schiemert, Richard, Wilkens, Marco
Credit and Capital Markets – Kredit und Kapital, Vol. 47 (2014), Iss. 4 : pp. 571–610
Abstract
The spread risk premium component of credit default swap (CDS) spreads represents a compensation demanded by protection sellers for future changes in CDS spreads caused by unpredictable fluctuations in the reference entity"s risk-neutral default intensity. This paper defines and estimates a measure of the spread risk premium component in CDS spreads of a sample of European investment-grade firms by using a stochastic intensity credit model. Our results show that, on average, investors demand a positive premium for such mark-to-market risks. After controlling for CDS market conditions, like liquidity and supply/demand effects, a panel data analysis of the estimated spread risk premia reveals a positive impact of event risk captured by the overall stock market volatility and a negative impact of investors" appetite for exposure to credit markets as reflected by the overall CDS market.
Journal Article Details
Publisher Name: Global Science Press
Language: English
DOI: https://doi.org/10.3790/ccm.47.4.571
Credit and Capital Markets – Kredit und Kapital, Vol. 47 (2014), Iss. 4 : pp. 571–610
Published online: 2014-12
AMS Subject Headings: Duncker & Humblot
Copyright: COPYRIGHT: © Global Science Press
Pages: 40
Keywords: G12 G13 G15 credit default swap spread risk premium mark-to-market risk premium stochastic intensity model
Author Details
| Section Title | Page | Action | Price |
|---|---|---|---|
| Oliver Entrop / Richard Schiemert / Marco Wilkens: Spread Risk Premia in Corporate Credit Default Swap Markets | 1 |