Based on a reduced-form model of credit risk, we explore mispricing in the CDS spreads of North American companies and its economic content. Specifically, we develop a trading strategy using the model to trade out of sample market-neutral portfolios across the term structure of CDS contracts....

We show that the cross-autocorrelation also exists in the global CDS markets and develop an econometric model to capture the global correlation structure. We study implications on the credit risk transmission and contagion risk. We find four main results: (i) credit risk transmission is through...