The Determinants of CDS Spreads: The Case of Banks

Maria Mazzuca (), Caterina Di Tommaso and Fabio Piluso
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Maria Mazzuca: University of Calabria
Caterina Di Tommaso: University of Calabria
Fabio Piluso: University of Calabria

Chapter Chapter 7 in Financial Markets, SME Financing and Emerging Economies, 2017, pp 121-155 from Palgrave Macmillan

Abstract: Abstract Using a regression analysis, we study the determinants of credit default swapsCredit Default Swaps (CDS) spreads of 86 international banksBanks from 2009 to 2012. We are interested in empirically testing the explanatory power of credit risk, bank-specific, market and country-level factorsCountry-level factors . We find the following main results. The explanatory power of the model increases when bank-specific and market/country variables are considered. CapitalisationCapitalisation and size are the most relevant factors in determining the banks’ CDS spreads. When the rating decreases, the CDS premium increases, and this increase is significant when switching from investment to non-investment grade banks. Also, the market volatilityVolatility and slope of the yield curve affect the CDS spreads.

Keywords: volatilityVolatility; Credit Risk Variables; Bank-specific Variables; International Swaps And Derivatives Association (ISDA); Credit Spreads (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-54891-3_7

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DOI: 10.1007/978-3-319-54891-3_7

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