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Title :The determinants of the CDS - bond basis
Creator :Παπαδόπουλος, Ιορδάνης
Contributor :Γιαμουρίδης, Δανιήλ (Επιβλέπων καθηγητής)
Athens University of Economics and Business, Department of Accounting and Finance (Degree granting institution)
Type :Text
Extent :56p.
Language :en
Abstract :This dissertation studies the CDS Bond basis, which measures the difference between the CDS spread and the bond implied credit spread. We investigate the cross sectional variation in the basis for an extensive sample of individual firms from 01/01/2004 to 30/09/2009. We adopt the Par Equivalent CDS methodology in order to compute the theoretical bond implied CDS spread. Both firm specific and systematic factors are considered in our model. The results of our analysis confirm that the basis was slightly positive during the pre-crisis period and persistently negative during the crisis. Moreover, we show that the market liquidity and each firm’s credit risk are the most important variables. Furthermore, we find that the funding cost risk has explanatory power over the basis only for the period between the occurrence of the crisis and the bankruptcy of Lehman Brothers. In addition, counterparty risk becomes statistically and economically important only after the failure of Lehman Brothers. Finally, according to our results, each firm’s stock return and market stock return are not statistically significant variables.
Subject :CDs Bond basis
Credit default swaps spreads (CDS spreads)
Date Issued :23-07-2012
Licence :

File: Papadopoulos_2012.pdf

Type: application/pdf