Das, Sanjiv R.; Hanouna, Paul - In: Journal of Financial Intermediation 18 (2009) 1, pp. 112-123
We theorize and confirm a new channel by means of which liquidity costs are embedded in CDS spreads. We show that credit default swap (CDS) spreads are directly related to equity market liquidity in the Merton [Merton, R.C., 1974. On the pricing of corporate debt: The risk structure of interest...