Do CDS Maturities Matter in the Evaluation of the Information Content of Regulatory Banking Stress Tests? Evidence from European and US Stress Tests

Amavi S. S. Agbodji, Emmanuelle Nys and Alain Sauviat

Revue économique, 2021, vol. 72, issue 1, 65-102

Abstract: This paper questions the relevance of using only the 5-year maturity CDS spreads in the examination of the CDS market response to the disclosure of regulatory stress test results. Do the 5-year CDS contracts reflect all the relevant information on the response of the CDS market? Indeed, since a stress testing exercise measures tested banks? risk at different horizons, we suspect a difference in the market response depending on the horizons. Our empirical study shows that following the disclosure of stress tests? results, the information content provided by the different maturities differs. Therefore, simply using 5-year maturity CDS to assess banking risk is not sufficient. JEL Codes: G00, G14, G21, G28.

Keywords: regulatory stress tests; CDS maturities; market reaction; event study (search for similar items in EconPapers)
JEL-codes: G00 G14 G21 G28 (search for similar items in EconPapers)
Date: 2021
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Related works:
Working Paper: Do CDS Maturities Matter in the Evaluation of the Information Content of Regulatory Banking Stress Tests? Evidence from European and US Stress Tests (2021)
Working Paper: Do CDS maturities matter in the evaluation of the information content of regulatory banking stress tests? Evidence from European and US stress tests (2021)
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