Credit Default Swaps as Indicators of Bank Financial Distress
|Title:||Credit Default Swaps as Indicators of Bank Financial Distress||Authors:||Avino, Davide
|Permanent link:||http://hdl.handle.net/10197/7454||Date:||7-Jan-2016||Abstract:||We examine the ability of CDS contracts written on individual banks to provide market discipline. Changes in CDS spreads are found to represent a robust signal of bank failure, thus providing indirect market discipline. Furthermore, changes in CDS spreads provide information about the condition of banks which supplements that available from equity markets and contained in accounting metrics. Consistent results are detailed for both senior and subordinated CDS spreads. Our results hold for various cohorts, for excess and idiosyncratic changes in CDS and are robust to the use of alternative measures of bank distress, including rating downgrades and accounting risk.||Funding Details:||Science Foundation Ireland||Type of material:||Working Paper||Publisher:||University College Dublin. Geary Institute||Keywords:||CDS;Bank failure;Market discipline;Credit default swap||Language:||en||Status of Item:||Not peer reviewed|
|Appears in Collections:||Geary Institute Working Papers|
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