Correlations and linkages in credit risk: an investigation of the credit default swap market during the turmoil

Credit derivatives;Swaps (Finance);Default (Finance);Financial risk;Copulas (Mathematical statistics)

Wu, Weiou ; McMillan, David G. ; McMillan, David G.

University:University of St Andrews

Department:Management (School of )

关键词: Credit derivatives;    Swaps (Finance);    Default (Finance);    Financial risk;    Copulas (Mathematical statistics);   

Others  :  https://research-repository.st-andrews.ac.uk/bitstream/handle/10023/4048/WeiouWuPhDThesis.pdf?sequence=6&isAllowed=y

来源: DR-NTU

【 摘 要 】

This thesis investigates correlations and linkages in credit risk that widely exist in allsectors of the financial markets. The main body of this thesis is constructed aroundfour empirical chapters. I started with extending two main issues focused by earlierempirical studies on credit derivatives markets: the determinants of CDS spreads andthe relationship between CDS spreads and bond yield spreads, with a special focus onthe effect of the subprime crisis. By having observed that the linear relationship cannot fully explain the variation in CDS spreads, the third empirical chapter investigatedthe dependence structure between CDS spread changes and market variables using anonlinear copula method. The last chapter investigated the relationship between theCDS spread and another credit spread - the TED spread, in that a MVGARCH modeland twelve copulas are set forth including three time varying copulas. The results ofthis thesis greatly enhanced our understanding about the effect of the subprime crisison the credit default swap market, upon which a set of useful practical suggestions aremade to policy makers and market participants.