Restructuring risk in credit default swaps: An empirical analysis

被引：20

作者：

Berndt, Antje ^{[1
]}

Jarrow, Robert A. ^{[2
]}

Kang, ChoongOh ^{[3
]}

机构：

[1] Carnegie Mellon Univ, Tepper Sch Business, Pittsburgh, PA 15213 USA

[2] Cornell Univ, Johnson Grad Sch Management, Ithaca, NY 14853 USA

[3] Cornell Univ, Dept Econ, Ithaca, NY 14853 USA

来源：

STOCHASTIC PROCESSES AND THEIR APPLICATIONS | 2007年 / 117卷 / 11期

关键词：

credit default swaps; restructuring credit event; reduced-form credit risk modeling;

D O I：

10.1016/j.spa.2007.01.013

中图分类号：

O21 [概率论与数理统计]; C8 [统计学];

学科分类号：

020208 ; 070103 ; 0714 ;

摘要：

This paper estimates the price for restructuring risk in the US corporate bond market during 1999-2005. Comparing quotes from default swap (CDS) contracts with a restructuring event and without, we find that the average premium for restructuring risk represents 6%-8% of the swap rate without restructuring. We show that the restructuring premium depends on firm-specific balance-sheet and macroeconomic variables. And, when default swap rates without a restructuring event increase, the increase in restructuring premia is higher for low-credit-quality firms than for high-credit-quality firms. We propose a reduced-form arbitrage-free model for pricing default swaps that explicitly incorporates the distinction between restructuring and default events. A case study illustrating the model's implementation is provided. (C) 2007 Elsevier B.V. All rights reserved.

引用

页码：1724 / 1749

页数：26