The Determinants of CDS Spreads: The Case of UK Companies

Authors

KAJUROVÁ Veronika

Year of publication 2015
Type Article in Proceedings
Conference 2ND GLOBAL CONFERENCE ON BUSINESS, ECONOMICS, MANAGEMENT AND TOURISM
MU Faculty or unit

Faculty of Economics and Administration

Citation
Doi http://dx.doi.org/10.1016/S2212-5671(15)00433-5
Field Economy
Keywords Credit default swap spread; determinant; panel data regression
Attached files
Description Credit default swap spreads are considered as a measure of credit risk and as a leading indicator of the future development of creditworthiness, which can reflect the potential situation, resp. financial health of a company. Thus investors should pay attention to the factors that can affect credit default swap spreads. The aim of this study is to find out which determinants have the most significant influence on the spreads of credit default swaps issued on the debt of UK entities. A panel data regression is employed in order to explore the influence of selected determinants. The theoretical factors at companies' level and market determinants are taken into consideration - leverage, liquidity, equity volatility, risk free interest rate, slope of term structure, market return and market volatility. The role of observed variables is investigated in three periods - before, during and after the financial crisis and within the individual rating groups. The results are consistent with theoretical assumptions in most of the cases. The theoretical determinants have an explanatory power, but the power of individual variables was different in the particular periods. The findings can be beneficial for investors, as well as for analysts, risk managers or decision makers. (C) 2014 The Authors. Published by Elsevier B.V.
Related projects:

You are running an old browser version. We recommend updating your browser to its latest version.