Determinants of Credit Default Swap Spread: Evidence from Japan
نویسندگان
چکیده
In this paper, we investigate the determinants of credit default swap (CDS) spread for the Japanese market, which is one of the major CDS markets in the world. Our assessment of literature indicates that there is a lack of related empirical research using data from the Japanese market. By analyzing data from 2001 to 2004, the empirical results show that the theoretical determinants, including leverage, historical volatility, and risk-free rate, perform well in explaining cross-sectional variation in the level of CDS spread. We also find that the effects of the theoretical determinants are more sensitive for lower credit rating firms than those with a higher credit rating. Finally, our findings remain robust for different sub-sample periods. JEL Classification: G00; G19
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