Corporate credit default swap systematic factors

Ka Kei Chan, Ming‐Tsung Lin, Qinye Lu

Research output: Contribution to journalArticlepeer-review

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 (Formula presented.) of 35%), while firm-specific factors are limited (with (Formula presented.) 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.

Original languageEnglish
Number of pages33
JournalJournal of Futures Markets
Early online date16 Apr 2024
DOIs
Publication statusE-pub ahead of print - 16 Apr 2024

Bibliographical note

We thank the journal editor professor Bart Frijns and the anonymous reviewer for constructive feedback. We also thank the conference participants in 2021 EFiC Essex conference and 2022 FMARC Cyprus conference for helpful comments. All errors remain ours.

Data Availability Statement

All data used is obtained from third‐party data providers. Data will be made available on request with the permission ofthe data providers.

Keywords

  • CDS determinants
  • CDS firm-specific factors
  • CDS systematic factors
  • credit default swap
  • credit risk

ASJC Scopus subject areas

  • Economics and Econometrics
  • Accounting
  • General Business,Management and Accounting
  • Finance

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