Credit Risk in a Pandemic

Hans Byström

No 2021:1, Working Papers from Lund University, Department of Economics

Abstract: Using different measures of how the Covid-19 pandemic progresses we find that the level of credit risk among US blue chip companies increases in tandem with the Covid-19 virus spreading. The credit risk increases dramatically during the pandemic, but we find it to be short of the levels seen during the 2008–2009 financial crisis. Furthermore, we find weekly ups and downs in credit risk and virus impact to be significantly positively correlated throughout the pandemic. Finally, Basel II capital requirements increase drastically when the pandemic strikes but, again, not to the levels seen during the financial crisis.

Keywords: credit risk; Covid-19; equity market; debt market; CDS; Merton model; Basel II (search for similar items in EconPapers)
JEL-codes: G10 G33 I18 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2021-01-04
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-cwa, nep-fmk and nep-rmg
Note: Forthcoming in Journal of Fixed Income
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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