Regime Dependent Liquidity Determinant of Credit Default Swap Spread Changes

Biao Guo, David Newton

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

In this article we construct a liquidity measure for credit default swaps (CDS) and investigate the relation between the changes in CDS spreads and the determinants implied by structural models of default, including firm leverage, volatility, risk-free interest rate, and liquidity. Using a dummy-variable pooling regression and a Markov regime-switching model, we show strong evidence that these determinants, especially the liquidity determinant, are significant and time varying.
Original languageEnglish
Pages (from-to)279-298
Number of pages21
Journal Journal Of Financial Research
Volume36
Issue number2
DOIs
Publication statusPublished - 17 Jun 2013

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Liquidity
Credit default swap (CDS) spreads
Structural model
Pooling
Leverage
Time-varying
Dummy variables
Volatility risk
Credit default swaps
Interest rates
Markov regime switching model

Cite this

Regime Dependent Liquidity Determinant of Credit Default Swap Spread Changes. / Guo, Biao; Newton, David.

In: Journal Of Financial Research, Vol. 36, No. 2, 17.06.2013, p. 279-298.

Research output: Contribution to journalArticle

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