Li, Liuling; Mizrach, Bruce - Department of Economics, Rutgers University-New Brunswick - 2010
We compare several models for Bear Stearns' credit default swap spreads estimated via a Markov chain Monte Carlo algorithm. The Bayes Factor selects a CKLS model with GARCH-EPD errors as the best model. This model captures the volatility clustering and extreme tail returns of the swaps during...