Exploring the CDS-Bond Basis
AbstractMarkets for credit default swaps (CDS) and bonds of the same reference entity and maturity are bound by no-arbitrage conditions. Indeed, using a large data set we show that CDS premia and par asset swap spreads are mostly cointegrated. Nonetheless, the average CDS-bond basis (i.e. the difference between both measures) is positive in the period 2004-2005. We detect fourteen different economic basis drivers, which make the basis firm-specific and time-dependent. Furthermore, we describe the basis smile, and illustrate that the average basis is the lowest for five year maturities of corporate credits denominated in euro.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bank of Belgium in its series Working Paper Research with number 104.
Length: 41 pages
Date of creation: Nov 2006
Date of revision:
Contact details of provider:
Postal: Boulevard de Berlaimont 14, B-1000 Bruxelles
Phone: (+ 32) (0) 2 221 25 34
Fax: (+ 32) (0) 2 221 31 62
Web page: http://www.nbb.be
More information through EDIRC
Bond; Co integration; Credit; Risk Neutrality;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G19 - Financial Economics - - General Financial Markets - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-01 (All new papers)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Gann, Philipp & Laut, Amelie, 2008. "Einflussfaktoren auf den Credit Spread von Unternehmensanleihen," Discussion Papers in Business Administration 4231, University of Munich, Munich School of Management.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.