Slow- and Fast-Moving Information Content of CDS Spreads: New Endogenous Systematic Factors

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Abstract

This paper proposes two new Credit Default Swap (CDS) endogenous systematic
factors constructed from peer-CDS information. The factors capture slow-moving
credit risk information, as well as fast-moving newly arrived market information
embedded in the most recent CDS quotes. Using a sample of U.S. non-financial
listed firms from 2002 to 2011, we find that these two endogenous systematic factors
dominate firm-specific factors and other widely known systematic factors in in
sample and out-of-sample CDS spread predictions.

Bibliographical metadata

Original languageEnglish
JournalEuropean Journal of Finance
Early online date23 Sep 2019
DOIs
Publication statusPublished - 2019