Theoretically, the risk premium captured by Credit Default Swap (CDS) and bond yield spreads should be equal. However, data reveals a significant difference between the two spreads. We explore the presence of a mean-reverting behavior in this difference (CDS-bond basis), for selected emerging...

We estimate the nondefault component of corporate bond yield spreads and examine its relationship with bond liquidity. We measure bond liquidity using intraday transactions data and estimate the default component using the term structure of credit default swaps (CDS) spreads. With swap rate as...

The misalignment between corporate bond and credit default swap (CDS) spreads (i.e., CDSbond basis) during the 2007-09 financial crisis is often attributed to corporate bond dealers shedding off their inventory, right when liquidity was scarce. This paper documents evidence against this...

The misalignment between corporate bond and credit default swap (CDS) spreads (i.e., CDSbond basis) during the 2007-09 financial crisis is often attributed to corporate bond dealers shedding off their inventory, right when liquidity was scarce. This paper documents evidence against this...