Sovereign credit default swaps and the macroeconomy
نویسندگان
چکیده
منابع مشابه
Sovereign Debt Renegotiation and Credit Default Swaps
A credit default swap (CDS) contract provides insurance against default. After a country defaults, the country and its lenders usually negotiate over the share of the defaulted debt to be repaid. This paper incorporates CDS contracts into a sovereign default model and demonstrates that the existence of a CDS market results in lower default probability, higher debt levels, and lower nancing cost...
متن کاملTheory and evidence on the dynamic interactions between sovereign credit default swaps and currency options
Using sovereign CDS spreads and currency option data for Mexico and Brazil, we document that CDS spreads covary with both the currency option implied volatility and the slope of the implied volatility curve in moneyness. We propose a joint valuation framework, in which currency return variance and sovereign default intensity follow a bivariate diffusion with contemporaneous correlation. Estimat...
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significant aspect of the evolution of credit markets has been the development of credit-risk transfer through the use of derivatives.1 Globally, one of the fastest-growing derivative products is the credit default swap (CDS). This article describes the basic mechanics of a CDS, assesses the impact of CDSs on market efficiency, and considers the implications of the growing market for CDSs for f...
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We examine the effect of introducing credit default swaps (CDSs) on firms’ investment and financing policies. Our model allows for dynamic investment and dynamic financing using equity and debt, and debt holders can trade in the CDS market. After calibrating the model, we compare an economy with a CDS market to an economy without one. The model contains both positive and negative effects of CDS...
متن کاملCredit Risk and IFRS : The Case of Credit Default Swaps
Theory predicts that the accounting information transparency affects credit spreads. Given that one of the putative benefits of International Financial Reporting Standards (IFRS) is transparency of accounting information, this study evaluates the impact of IFRS on the pricing of credit spreads in the over-the-counter Credit Default Swap (CDS) market. Using a difference in differences methodolog...
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ژورنال
عنوان ژورنال: Applied Economics Letters
سال: 2011
ISSN: 1350-4851,1466-4291
DOI: 10.1080/13504851.2011.568390