Corporate Credit Default Swap Systematic Factors

Ka Kei Chan, Ming-Tsung Lin and Qinye Lu

Essex Finance Centre Working Papers from University of Essex, Essex Business School

Abstract: This study examines the statistical significance of systematic and firm-specific determinants of Credit Default Swap (CDS) price variations. We cast doubt on the firm-specific determinants showed in prior research to be statistical significance to CDS price variations. In this paper, two research questions are studied: (1) “Which and to what extent systematic factors can explain the individual CDS price variations?” and (2) “Which and to what extent the firm-specific factors can predict CDS spread variations that are not ex- plained by systematic factors?”. We find that systematic factors account for the majority changes of the CDS spreads (R2 = 35%). Merely 4 of 28 firm-specific factors are statistically significant predictors for CDS changes that are not explained by the systematic factors and they have little explanatory power (R2 = 8%). We document that individual CDS variations can

Keywords: Credit Default Swap (CDS); CDS Systematic Factors (search for similar items in EconPapers)
Date: 2020-11-24
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Persistent link: https://EconPapers.repec.org/RePEc:esy:uefcwp:29019

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