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 individual firms' credit default swaps (CDS). While existing literature ac- knowledges the importance of the levels of macroeconomic factors in determining CDS spreads, we find that the second moments of these factors--macroeconomic uncertainty--have significant explanatory power over and above that 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: C23 D8 G13 (search for similar items in EconPapers)
Date: 2009-11-03, Revised 2010-03-03
New Economics Papers: this item is included in nep-rmg
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Citations: View citations in EconPapers (26)

Published, Applied Financial Economics, 20, 1163-1171, 2010.

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Journal Article: Macroeconomic uncertainty and credit default swap spreads (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:724

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