The reaction of emerging market credit default swap spreads to sovereign credit rating changes
This paper examines the effect of sovereign credit rating change announcements on the CDS spreads of the event countries, and their spillover effects on other emerging economies' CDS premiums. We find that positive events have a greater impact on CDS markets in the two-day period surrounding the event, and are more likely to spill over to other emerging countries. Alternatively, CDS markets anticipate negative events, and previous changes in CDS premiums can be used to estimate the probability of a negative credit event. The transmission mechanisms for positive events are the common creditor and competition in trade markets.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hull, John & Predescu, Mirela & White, Alan, 2004. "The relationship between credit default swap spreads, bond yields, and credit rating announcements," Journal of Banking & Finance, Elsevier, vol. 28(11), pages 2789-2811, November.
- Hand, John R M & Holthausen, Robert W & Leftwich, Richard W, 1992. " The Effect of Bond Rating Agency Announcements on Bond and Stock Prices," Journal of Finance, American Finance Association, vol. 47(2), pages 733-52, June.
- Reuven Glick & Andrew K. Rose, 1998.
"Contagion and trade: why are currency crises regional?,"
Pacific Basin Working Paper Series
98-03, Federal Reserve Bank of San Francisco.
- Glick, Reuven & Rose, Andrew K., 1999. "Contagion and trade: Why are currency crises regional?," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 603-617, August.
- Glick, Reuven & Rose, Andrew K, 1998. "Contagion and Trade: Why are Currency Crises Regional," CEPR Discussion Papers 1947, C.E.P.R. Discussion Papers.
- Reuven Glick & Andrew K. Rose, 1998. "Contagion and Trade: Why Are Currency Crises Regional?," NBER Working Papers 6806, National Bureau of Economic Research, Inc.
- Amar Gande & David Parsley, 2003.
"News Spillovers in the Sovereign Debt Market,"
062003, Hong Kong Institute for Monetary Research.
- Van Rijckeghem, Caroline & Weder, Beatrice, 1999. "Financial contagion: Spillovers through banking centers," CFS Working Paper Series 1999/17, Center for Financial Studies (CFS).
- Helmut Reisen & Julia von Maltzan, 1999.
"Boom and Bust and Sovereign Ratings,"
OECD Development Centre Working Papers
148, OECD Publishing.
- Romain Rancière, 2002. "Credit derivatives in emerging markets," Economics Working Papers 856, Department of Economics and Business, Universitat Pompeu Fabra.
- Norden, Lars & Wagner, Wolf, 2008.
"Credit derivatives and loan pricing,"
Journal of Banking & Finance,
Elsevier, vol. 32(12), pages 2560-2569, December.
- Acharya, Viral V. & Johnson, Timothy C., 2007.
"Insider trading in credit derivatives,"
Journal of Financial Economics,
Elsevier, vol. 84(1), pages 110-141, April.
- Forte, Santiago & Peña, Juan Ignacio, 2009. "Credit spreads: An empirical analysis on the informational content of stocks, bonds, and CDS," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 2013-2025, November.
- Patrick McGuire & Martijn A Schrijvers, 2003. "Common factors in emerging market spreads," BIS Quarterly Review, Bank for International Settlements, December.
- Norden, Lars & Weber, Martin, 2004.
"Informational Efficiency of Credit Default Swap and Stock Markets: The Impact of Credit Rating Announcements,"
CEPR Discussion Papers
4250, C.E.P.R. Discussion Papers.
- Norden, Lars & Weber, Martin, 2004. "Informational efficiency of credit default swap and stock markets: The impact of credit rating announcements," Journal of Banking & Finance, Elsevier, vol. 28(11), pages 2813-2843, November.
- Franck Packer & Haibin Zhu, 2005. "Contractual terms and CDS pricing," BIS Quarterly Review, Bank for International Settlements, March.
- Alexander, Carol & Kaeck, Andreas, 2008. "Regime dependent determinants of credit default swap spreads," Journal of Banking & Finance, Elsevier, vol. 32(6), pages 1008-1021, June.
- Ciarlone, Alessio & Piselli, Paolo & Trebeschi, Giorgio, 2009.
"Emerging markets' spreads and global financial conditions,"
Journal of International Financial Markets, Institutions and Money,
Elsevier, vol. 19(2), pages 222-239, April.
- Alessio Ciarlone & Paolo Piselli & Giorgio Trebeschi, 2007. "Emerging Markets Spreads and Global Financial Conditions," Temi di discussione (Economic working papers) 637, Bank of Italy, Economic Research and International Relations Area.
- Reinhart, Carmen & Kaminsky, Graciela, 1998.
"On crises, contagion, and confusion,"
13709, University Library of Munich, Germany.
- Marian Micu & Eli M Remolona & Philip D. Wooldridge, 2006. "The price impact of rating announcements: which announcements matter?," BIS Working Papers 207, Bank for International Settlements.
- Steiner, Manfred & Heinke, Volker G, 2001. "Event Study Concerning International Bond Price Effects of Credit Rating Actions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(2), pages 139-57, April.
- Philippe Jorion & Gaiyan Zhang, 2009. "Credit Contagion from Counterparty Risk," Journal of Finance, American Finance Association, vol. 64(5), pages 2053-2087, October.
- Jorion, Philippe & Zhang, Gaiyan, 2007. "Good and bad credit contagion: Evidence from credit default swaps," Journal of Financial Economics, Elsevier, vol. 84(3), pages 860-883, June.
- Stolper, Anno, 2009. "Regulation of credit rating agencies," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1266-1273, July.
- Frank Packer & Chamaree Suthiphongchai, 2003. "Sovereign credit default swaps," BIS Quarterly Review, Bank for International Settlements, December.
When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:34:y:2010:i:12:p:2861-2873. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.