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Article: Market conditions, default risk and credit spreads

TitleMarket conditions, default risk and credit spreads
Authors
KeywordsCredit default swaps
Credit risk
Credit spreads
Market conditions
Issue Date2010
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jbf
Citation
Journal Of Banking And Finance, 2010, v. 34 n. 4, p. 724-734 How to Cite?
AbstractThis study empirically examines the impact of the interaction between market and default risk on corporate credit spreads. Using credit default swap (CDS) spreads, we find that average credit spreads decrease in GDP growth rate, but increase in GDP growth volatility and jump risk in the equity market. At the market level, investor sentiment is the most important determinant of credit spreads. At the firm level, credit spreads generally rise with cash flow volatility and beta, with the effect of cash flow beta varying with market conditions. We identify implied volatility as the most significant determinant of default risk among firm-level characteristics. Overall, a major portion of individual credit spreads is accounted for by firm-level determinants of default risk, while macroeconomic variables are directly responsible for a lesser portion. © 2009 Elsevier B.V. All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/85606
ISSN
2015 Impact Factor: 1.485
2015 SCImago Journal Rankings: 1.264
SSRN
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorTang, DYen_HK
dc.contributor.authorYan, Hen_HK
dc.date.accessioned2010-09-06T09:07:06Z-
dc.date.available2010-09-06T09:07:06Z-
dc.date.issued2010en_HK
dc.identifier.citationJournal Of Banking And Finance, 2010, v. 34 n. 4, p. 724-734en_HK
dc.identifier.issn0378-4266en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85606-
dc.description.abstractThis study empirically examines the impact of the interaction between market and default risk on corporate credit spreads. Using credit default swap (CDS) spreads, we find that average credit spreads decrease in GDP growth rate, but increase in GDP growth volatility and jump risk in the equity market. At the market level, investor sentiment is the most important determinant of credit spreads. At the firm level, credit spreads generally rise with cash flow volatility and beta, with the effect of cash flow beta varying with market conditions. We identify implied volatility as the most significant determinant of default risk among firm-level characteristics. Overall, a major portion of individual credit spreads is accounted for by firm-level determinants of default risk, while macroeconomic variables are directly responsible for a lesser portion. © 2009 Elsevier B.V. All rights reserved.en_HK
dc.languageengen_HK
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jbfen_HK
dc.relation.ispartofJournal of Banking and Financeen_HK
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.rightsNOTICE: this is the author’s version of a work that was accepted for publication in <Journal of Banking and Finance>. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in PUBLICATION, [VOL 34, ISSUE 4, (2010)] DOI 10.1016/j.jbankfin.2009.05.018-
dc.subjectCredit default swapsen_HK
dc.subjectCredit risken_HK
dc.subjectCredit spreadsen_HK
dc.subjectMarket conditionsen_HK
dc.titleMarket conditions, default risk and credit spreadsen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0378-4266&volume=34&issue=4&spage=743&epage=753&date=2010&atitle=Market+conditions,+default+risk+and+credit+spreadsen_HK
dc.identifier.emailTang, DY: yjtang@hku.hken_HK
dc.identifier.authorityTang, DY=rp01096en_HK
dc.description.naturepostprint-
dc.identifier.doi10.1016/j.jbankfin.2009.05.018en_HK
dc.identifier.scopuseid_2-s2.0-75849138933en_HK
dc.identifier.hkuros164551en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-75849138933&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume34en_HK
dc.identifier.issue4en_HK
dc.identifier.spage724en_HK
dc.identifier.epage734en_HK
dc.identifier.isiWOS:000278173200005-
dc.publisher.placeNetherlandsen_HK
dc.identifier.ssrn1098108-
dc.identifier.scopusauthoridTang, DY=13606932900en_HK
dc.identifier.scopusauthoridYan, H=35328765400en_HK
dc.identifier.citeulike5342204-

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