An Empirical Analysis of the Dynamic Relationship between Investment Grade Bonds and Credit Default Swaps

@article{Blanco2004AnEA,
  title={An Empirical Analysis of the Dynamic Relationship between Investment Grade Bonds and Credit Default Swaps},
  author={R. Blanco and S. Brennan and Ian Marsh},
  journal={Derivatives},
  year={2004}
}
  • R. Blanco, S. Brennan, Ian Marsh
  • Published 2004
  • Economics
  • Derivatives
  • This paper analyses the behaviour of credit default swaps (CDS) for a sample of firms and finds support for the theoretical equivalence of CDS prices and credit spreads. When this is violated, the CDS price can be viewed as an upper bound on the price of credit risk, while the spread provides a lower bound. The paper shows that the CDS market is the main forum for credit risk price discovery and that CDS prices are better integrated with firm-specific variables in the short run. Both markets… CONTINUE READING
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