CDS spreadscredit ratingsevent studysovereign debtThis paper explores the impact of sovereign credit rating news from three credit rating agencies, namely Moody's, Fitch, and Standard & Poors, on credit default swaps (CDS). We use an event study methodology to analyze how CDS spread reacts to...
Credit spreads can be a major contributor to future defaults because of the marginal pressure on cash flow when an issuer needs to refinance maturing debt. The U.S. speculative-grade corporate spread indicates future defaults based on a rou...
Pension funds need to manage their credit risk according to the Finnish law and Finland's financial authority's regulation. Currently one key component of the solvency requirement calculations are credit ratings defined by the credit rating agencies. After the financial crisis, there has been more ...
Thus, CDS spreads play a crucial role as they provide timely insights into market liquidity and sentiment regarding the credit risk of entities covered, offering an alternative viewpoint to that provided by credit rating agencies. This is particularly significant as CDS spreads often anticipate rating...
The price of a CDS for a particular company is often used to measure the creditworthiness of a company since the price of the CDS will vary quickly in response to the market's assessment of the company's creditworthiness; by contrast, changes in credit ratings issued by credit rating ...
The analysis is performed at an index level and by rating group; as well as for the pre-crisis, crisis and post-crisis periods. Our findings are consistent with Merton's theoretical framework. At an index level, futures jumps are important when explaining CDS spread changes, with negative ...
ratingdowngrades,bankruptcy, as well as default on a loan. Market Size The size of the credit default swap market is large by any measure. The notational amount on outstanding OTC CDS was nearly $30 trillion in 2006 according to the Bank for International Settlements. Information published by ...
This paper attempts to explain the yield spreads charged to new corporate debt issues by comparing the initial yields of a set of 3,287 securities issued over eleven years in the US. We use the measure of constant maturity Treasury rates on the day of issue against the Moody's Aaa Corporat...
Moody's Global Credit Policy February 2009 Corporate Default and Recovery Rates, 1920-2008 Summary This report comprises Moody's twenty-second annual default study in which we update statistics on the default, loss, and rating transition experience of corporate bond and loan issuers for 2008, as ...
In another exercise, we simulate from a structural model with stochastic volatility and find that VRP can indeed provide additional explanatory power for a representative firm’s credit spreads, even with the control of a true leverage ratio. On the contrary, the Merton model without stochastic ...