• Corpus ID: 18773697

Credit derivatives and loan pricing q

@inproceedings{Norden2015CreditDA,
  title={Credit derivatives and loan pricing q},
  author={Lars Norden and Wolf Wagner},
  year={2015}
}
This paper examines the relation between the new markets for credit default swaps (CDS) and banks’ pricing of syndicated loans to US corporates. We find that changes in CDS spreads have a significantly positive coefficient and explain about 25% of subsequent monthly changes in aggregate loan spreads during 2000–2005. Moreover, when compared to traditional explanatory factors, they turn out to be the dominant determinant of loan spreads. In particular, they explain loan rates much better than… 

References

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Journal of Banking & Finance
  • Journal of Banking & Finance
  • 2008
5 By contrast, bond markets are dominated by buy-and-hold investors and hedging credit risk is difficult there
  • 5 By contrast, bond markets are dominated by buy-and-hold investors and hedging credit risk is difficult there
By means of comparison, firm-level studies can typically explain in total about 25% of (weekly) bond spread changes using a wide set of explanatory factors (e.g
  • By means of comparison, firm-level studies can typically explain in total about 25% of (weekly) bond spread changes using a wide set of explanatory factors (e.g