We investigate the link between sovereign credit default swaps (CDS) and currency carry trades. We demonstrate that the term structure of sovereign CDS exhibits a significant explanatory power for crash risk and currency risk. We show that global uncertainty shocks in developed economies have a...

We study the links between sovereign credit risk and the currency forward bias. In a setting of defaultable sovereign bonds, we show that the forward bias can be negatively linked to sovereign credit risk. We confirm empirically that the forward bias is negatively associated to sovereign CDS...

We study the links between sovereign credit risk and the currency forward bias. In a setting of defaultable sovereign bonds, we show that the forward bias can be linked negatively to sovereign credit risk. We confirm empirically that the forward bias is negatively associated to sovereign CDS...

This paper explores the extent to which term structure of individual CDS spreads can be explained by the firm's rating. Using the Nelson-Siegel model, we construct, for each day, CDS curves from a cross-section of CDS spreads for each rating class. We find that individual CDS deviations from the...

This paper proposes two new Credit Default Swap (CDS) endogenous systematic factors constructed from peer-CDS information. The factors capture slow-moving credit risk information, as well as fast-moving newly arrived market information embedded in the most recent CDS quotes. Using a sample of...

This study examines a comprehensive set of systematic and firm-specific determinants of Credit Default Swap (CDS) price variations. Different from prior studies, we allow the impact of systematic factors to be varying for each firm. Two research questions are studied: (1) “Which and to what...

Credit default swaps (CDSs) and deep out-of-the-money put (DOOMP) options can both be used as a credit protection instrument. However, partial market segmentation results in deviations between firm hazard rates implied by these contracts. These deviations are driven by a systematic...