How Important is a Non-Default Factor for CDS Valuation?
- Authors
- Guo, Biao; Han, Qian; Lee, Jaeram; Ryu, Doojin
- Issue Date
- Nov-2015
- Publisher
- WILEY-BLACKWELL
- Citation
- JOURNAL OF FUTURES MARKETS, v.35, no.11, pp.1088 - 1101
- Journal Title
- JOURNAL OF FUTURES MARKETS
- Volume
- 35
- Number
- 11
- Start Page
- 1088
- End Page
- 1101
- URI
- https://scholarworks.bwise.kr/gachon/handle/2020.sw.gachon/80350
- DOI
- 10.1002/fut.21699
- ISSN
- 0270-7314
- Abstract
- Unlike previous research based on structural or reduced-form models, we investigate the importance of a non-default factor for credit default swap (CDS) valuation by conducting non-parametric local linear regression analyses using corporate CDS data from 2002 to 2011. We find that a model with an additional non-default factor significantly outperforms a model with only a default factor, both in-sample and out-of-sample, particularly for low credit rating CDS spreads. This improvement is robust to both credit rating and maturity. Our findings support the idea that non-default risk is priced in CDS spreads and help explain CDS valuation. (c) 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:1088-1101, 2015
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Collections - 경영대학 > 경영학부(글로벌경영학) > 1. Journal Articles
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