Using a regression analysis, we study the determinants of credit default swaps (CDS) spreads of 86 international banks from 2009 to 2012. We are interested in empirically testing the explanatory power of credit risk, bank-specific, market and country-level factors . We find the following main results. The explanatory power of the model increases when bank-specific and market/country variables are considered. Capitalisation and size are the most relevant factors in determining the banks’ CDS spreads. When the rating decreases, the CDS premium increases, and this increase is significant when switching from investment to non-investment grade banks. Also, the market volatility and slope of the yield curve affect the CDS spreads.

The Determinants of CDS Spreads: The Case of Banks

Di Tommaso, Caterina;
2017-01-01

Abstract

Using a regression analysis, we study the determinants of credit default swaps (CDS) spreads of 86 international banks from 2009 to 2012. We are interested in empirically testing the explanatory power of credit risk, bank-specific, market and country-level factors . We find the following main results. The explanatory power of the model increases when bank-specific and market/country variables are considered. Capitalisation and size are the most relevant factors in determining the banks’ CDS spreads. When the rating decreases, the CDS premium increases, and this increase is significant when switching from investment to non-investment grade banks. Also, the market volatility and slope of the yield curve affect the CDS spreads.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11586/296189
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