Macroeconomic Uncertainty and Credit Default Swap Spreads

Christopher Baum () and Chi Wan

No 724, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: This paper empirically investigates the impact of macroeconomic uncertainty on the spreads of credit default swaps (CDS). While existing literature acknowledges the importance of the levels of macroeconomic factors in determining CDS spreads, we show that the second moments of these factors--macroeconomic uncertainty--predict CDS spreads even in the presence of traditional macroeconomic factors such as the risk-free rate and the Treasury term spread.

Keywords: Macroeconomic uncertainty; CDS spreads; default risk; credit risk (search for similar items in EconPapers)
JEL-codes: D8 G13 C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg
Date: 2009-11-03

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Persistent link: http://EconPapers.repec.org/RePEc:boc:bocoec:724

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