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Macroeconomic uncertainty and credit default swap spreads

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  • Christopher Baum
  • Chi Wan

Abstract

This article empirically investigates the impact of macroeconomic uncertainty on the spreads of individual firms' Credit Default Swaps (CDSs). While the existing literature acknowledges the importance of the levels of macroeconomic factors in determining CDS spreads, we find that the second moments of these factors-macroeconomic uncertainty-have significant explanatory power over and above that of traditional macroeconomic factors such as the risk-free rate and the Treasury term spread.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/09603101003781455
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 20 (2010)
Issue (Month): 15 ()
Pages: 1163-1171

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Handle: RePEc:taf:apfiec:v:20:y:2010:i:15:p:1163-1171

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Cited by:
  1. Ine Van Robays, 2012. "Macroeconomic Uncertainty and the Impact of Oil Shocks," CESifo Working Paper Series 3937, CESifo Group Munich.
  2. Ballestra, Luca Vincenzo & Pacelli, Graziella, 2014. "Valuing risky debt: A new model combining structural information with the reduced-form approach," Insurance: Mathematics and Economics, Elsevier, vol. 55(C), pages 261-271.

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