Dynamic Interactions Between Interest-Rate and Credit Risk: Theory and Evidence on the Credit Default Swap Term Structure-super-*
This paper examines the interaction between default risk and interest-rate risk in determining the term structure of credit default swap spreads at different industry sectors and credit-rating classes. The paper starts with a parsimonious three-factor interest-rate dynamic term structure and projects the credit spread at each industry sector and rating class to these interest-rate factors while also allowing the projection residual dynamics to depend on the level of the interest-rate factors. Estimation shows that credit risk exhibits intricate dynamic interactions with the interest-rate factors. Copyright 2013, Oxford University Press.
Year of publication: |
2013
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Authors: | Chen, Ren-Raw ; Cheng, Xiaolin ; Wu, Liuren |
Published in: |
Review of Finance. - European Finance Association - EFA, ISSN 1572-3097. - Vol. 17.2013, 1, p. 403-441
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Publisher: |
European Finance Association - EFA |
Saved in:
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