Economics, Econometrics and Finance
a year ago

Sell-side risk constraints revolutionize understanding of credit default swaps.

Finance research letters
Determinants of credit default swap spread changes: The sell-side perspective
Byungmin Oh, Haerang Park, Denis Yongmin Joe

Paper Summary

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The study looked at changes in credit default swap spreads from 2002 to 2020. They found that only a small portion of these changes can be explained by credit-related factors. Instead, a big part of the changes is due to a common factor that affects many different companies. The study also showed that constraints on how much risk financial institutions can take on play a big role in explaining these changes in credit default swap spreads.