This paper examines whether the tone of corporate textual disclosures related to risk and uncertainty conveys relevant information to the credit default swap (CDS) market. Prior studies largely focus on the amount of risk disclosures and provide inconclusive evidence on the usefulness of risk...

This paper attempts to explain the credit default swap (CDS) premium by using a novel approach to identify the volatility and jump risks of individual firms from a unique dataset of high-frequency CDS spreads. I find that the volatility risk alone predicts 55% of the variation in CDS spread...

Cross-market deviations in equity put option prices and credit default swap spreads are temporal and revert to their usual level shortly after they occur, on average within about one week. The process of reversion involves predictable and economically significant changes also in the equity...

Using a sample of Credit Default Swap (CDS) prices and corresponding reference corporate bond yield spreads for the period 6/2008 to 9/2009, we show that funding-liquidity (shadow cost of capital for arbitrageurs) as well as asset specific liquidity (determinants of margin requirements) explain...

We reinvestigate the CDS-bond basis negativity puzzle after the financial crisis. This puzzle is defined as the unexpected persistence of the dislocation between bond and derivative credit markets. We show that the first two moments of the basis are described by three distinct Markov regimes...

The Credit Default Swap (CDS) basis was significantly negative during the 2007-2009 financial crisis, which was considered an anomaly. Using single-name CDS data, we find that the CDS basis decreases as the funding costs, credit risk premium, and market illiquidity increase. Further,...

Minimal discounted distorted expectations across a range of stress levels are employed to model risk acceptability in markets. Interactions between discounting and stress levels used in measure changes are accommodated by lowering discount rates for the higher stress levels. Acceptability...

This study tests whether IFRS adoption increased accounting transparency based on model-driven hypotheses. Duffie and Lando (2001) show that changes to accounting transparency affect the spread/maturity relation of CDS instruments in very specific ways. Consistent with their model, we find that...

Default risk in equity returns can be measured by structural models of default. In this paper we propose a credit warning signal (CWS) based on the Merton default risk (MDR) model and a Regime-switching default risk (RSDR) model. The RSDR model is a generalization of the MDR model, comprises...

In this paper, I show that Polleit and Mariano (2011) are right in concluding that Credit Default Swaps (CDS) are per se unobjectionable from Rothbard's libertarian perspective on property rights and contract theory, but that they fail to derive this conclusion properly. I therefore outline the...