Debt rating downgrades of financial institutions: causality tests on single-issue CDS and iTraxx

Autor:	Olivier Nataf, Lieven De Moor
Přispěvatelé:	Business, Faculty of Economic and Social Sciences and Solvay Business School
Rok vydání:	2019
Předmět:	Finance 050208 finance Credit default swap business.industry 05 social sciences Perspective (graphical) Causality iTraxx Granger causality 0502 economics and business Economics Bond credit rating 050207 economics business General Economics Econometrics and Finance
Zdroj:	Quantitative Finance. 19:1975-1993
ISSN:	1469-7696 1469-7688
DOI:	10.1080/14697688.2019.1619933
Popis:	This paper analyses the consequences of debt rating downgrades of financial institutions from a novel perspective. Instead of using the traditional event-study framework, our study relies on Granger causality tests performed on three samples of data from the iTraxx index to measure the repercussions of a negative rating change, leading to a twofold conclusion. First, it turned out that low levels of stress lead to unidirectional causality from the entire CDS market to the CDS written on the downgraded company, meaning that market players tend to exert more pressure on companies that are downgraded when the overall situation is calm. Conversely, our study points out that high levels of stress lead to a greater proportion of CDS-to-market causalities and even trigger feedback effects. These two main findings are reinforced by the Student tests and the ordered logistic regressions that are included in the scope of this study.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_dedup___::2cb83b78b4d026b6b4ff5d6f2ccf09ff https://doi.org/10.1080/14697688.2019.1619933 Zobrazit plný text záznamu Plný text ve formátu PDF Plný text ve formátu HTML
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