Hedging stock sector risk with credit default swaps

This study examines the potential risk reducing benefits of credit default swaps (CDS) against risk in U.S. stock market sectors from 2004 to 2011. Tests of GARCH dynamic conditional correlation coefficients indicate that CDS serve as an effective hedge against risk in all stock sectors. CDS also provide a safe haven in times of extreme stock market volatility and during periods of financial crisis in a limited number of sectors.

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Year of publication:	2013
Authors:	Ratner, Mitchell ; Chiu, Chih-Chieh
Published in:	International Review of Financial Analysis. - Elsevier, ISSN 1057-5219. - Vol. 30.2013, C, p. 18-25
Publisher:	Elsevier
Subject:	Credit default swaps \| Dynamic conditional correlation \| Stock sector \| Hedge \| Safe haven

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Type of publication:	Article
Classification:	G11 - Portfolio Choice ; G2 - Financial Institutions and Services
Source:	RePEc - Research Papers in Economics

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