Hedging stock sector risk with credit default swaps

Mitchell Ratner and Chiu, Chih-Chieh (Jason)

International Review of Financial Analysis, 2013, vol. 30, issue C, 18-25

Abstract: This study examines the potential risk reducing benefits of credit default swaps (CDS) against risk in U.S. stock market sectors from 2004 to 2011. Tests of GARCH dynamic conditional correlation coefficients indicate that CDS serve as an effective hedge against risk in all stock sectors. CDS also provide a safe haven in times of extreme stock market volatility and during periods of financial crisis in a limited number of sectors.

Keywords: Credit default swaps; Dynamic conditional correlation; Stock sector; Hedge; Safe haven (search for similar items in EconPapers)
JEL-codes: G11 G2 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (66)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:30:y:2013:i:c:p:18-25

DOI: 10.1016/j.irfa.2013.05.001

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