Do correlated defaults matter for CDS premia? An empirical analysis

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• 作者：Christian Koziol ; Philipp Koziol ; Thomas Sch?n
• 关键词：Correlated defaults ; Systemic risk ; Idiosyncratic risk ; Collateralized debt obligations ; Credit default swaps ; Credit derivatives ; G14 ; G21
• 刊名：Review of Derivatives Research
• 出版年：2015
• 出版时间：October 2015
• 年：2015
• 卷：18
• 期：3
• 页码：191-224
• 全文大小：810 KB
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• 作者单位：Christian Koziol (1)
  Philipp Koziol (2)
  Thomas Sch?n (1)
  
  1. Department of Finance, University of Tübingen, Nauklerstr. 47, 72074, Tübingen, Germany
  2. Deutsche Bundesbank, Wilhelm-Epstein-Str. 14, 60431, Frankfurt, Germany
  
• 刊物主题：Finance/Investment/Banking;
• 出版者：Springer US
• ISSN：1573-7144

文摘

Correlated default factors and systemic risk are clearly priced in credit portfolio securities such as CDOs or index CDSs. In this paper we study an extensive CDX data set for evidence of whether correlated default factors are also present in the underlying CDS market. We develop a cash-flow-based top-down approach for modeling CDSs from which we can derive the following major contributions: (1) Correlated default factors did not matter for CDS prices prior to the financial crisis in 2008. During and after the crisis, however, their importance increased strongly. (2) We observe that correlated default factors primarily impact on the CDS prices of firms with an overall low CDS level. (3) Idiosyncratic risk factors for each single CDS play a major (minor) role when the CDS premia are high (low). Keywords Correlated defaults Systemic risk Idiosyncratic risk Collateralized debt obligations Credit default swaps Credit derivatives