Credit default swaps, bond spreads and the bond market

Tools

Zhu, Meicheng (2014) Credit default swaps, bond spreads and the bond market. [Dissertation (University of Nottingham only)] (Unpublished)

[thumbnail of Dissertation-M_Zhu.pdf] PDF - Registered users only - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader
Download (466kB)

Abstract

With the rapid development of the credit default swap (CDS) market, the issue of how the introduction of CDSs affects the corporate bond market has been of particular interest to researchers and policy makers. This has been investigated in the literature from two perspectives. One is to examine the relationship between the CDS and the bond markets in price discovery, and the other is concerned with researching the CDS trading effects on bond spreads. Referring to the former approach, most relevant studies find a dominant role of the CDS market over the bond market in the price discovery process, based on an analysis of CDS prices and credit spread data (e.g. Blanco et al., 2005; Baba and Inada, 2009). The latter is considered a more direct approach which aims to examine whether and how the corporate bond market and bond spreads are influenced by the onset of CDS trading. A limited number of leading articles in the literature following the second approach include Ashcraft and Santos (2009), Massa and Zhang (2012), and Shim and Zhu (2014).

This study adopts the second research method. It attempts to investigate the interactions of CDSs, credit risk, bond liquidity and bond yield spreads. The methodology introduced for the empirical analysis of CDS trading effects involves both cross-sectional and panel data regression analyses. The empirical element of the study is based on the U.S. samples over the period July 2007 – December 2013. From a theoretical perspective, this paper will summarize and explore the potential channels through which CDSs affect the bond market.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 11 Nov 2014 15:04
Last Modified: 19 Oct 2017 13:52
URI: https://eprints.nottingham.ac.uk/id/eprint/27150

Actions (Archive Staff Only)

Edit View Edit View