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The Determinants Of Credit Default Swap Rates: An Explanatory Study

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  • FATHI ABID

    (University of Sfax, UR: MO.DES.FI, Tunisia, Faculty of Business and Economics, Road of the Airport Km 4, Tunisia)

  • NADER NAIFAR

    (University of Sfax, UR: MO.DES.FI, Tunisia, Faculty of Business and Economics, Road of the Airport Km 4, Tunisia)

Abstract

The aim of this paper is to explain empirically the determinants of credit default swap rates using a linear regression. We document that the majority of variables, detected from the credit risk pricing theories, explain more than 60% of the total level of credit default swap. These theoretical variables are credit rating, maturity, riskless interest rate, slope of the yield curve and volatility of equities. The estimated coefficients for the majority of these variables are consistent with theory and they are significant both statistically and economically. We conclude that credit rating is the most determinant of credit default swap rates.

Suggested Citation

  • Fathi Abid & Nader Naifar, 2006. "The Determinants Of Credit Default Swap Rates: An Explanatory Study," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 9(01), pages 23-42.
    • Handle: RePEc:wsi:ijtafx:v:09:y:2006:i:01:n:s0219024906003445
    DOI: 10.1142/S0219024906003445
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    References listed on IDEAS

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