We show that liquidity tail risk in credit default swap (CDS) spreads is time-varying and explains variation in CDS spreads. We capture the liquidity tail risk of a CDS contract written on a firm by estimating the tail dependence, i.e., the asymptotic probability of a joint surge in the bid-ask...

In asset pricing, most studies focus on finding new factors such as macroeconomic factors or firm characteristics to explain risk premium. Investigating whether these factors are useful in forecasting stock returns remains active research in the field of finance and computer science. This paper...

This paper constructs an estimator for the number of common factors in a setting where both the sampling frequency and the number of variables increase. Empirically, we document that the covariance matrix of a large portfolio of US equities is well represented by a low rank common structure with...

We apply a multivariate multiplicative error model (MMEM) and investigate effects in the simultaneous processes of high-frequency return volatilities, trading volume, and trading intensities on the Italien Electronic Interbank Credit Market (e-MID). Analysing five minutes data from the Italian...

Using a vector error correction model I test whether shocks in the funding liquidity conditions in the U.S. and Europe separately explain deviations from the covered interest parity (CIP) between the U.S. Dollar and the Mexican Peso. I find that: (1) Apparent deviations from the CIP seem to be...

This note provides the first empirical assessment of the dynamic interrelation between government bond spreads and their associated credit default swaps (CDS). We use data for the Southern European countries (Greece, Italy, Portugal and Spain) that found themselves with a problematic public...