Journal article
Dynamics of CDS spread indexes of US financial sectors
Applied economics, v 45(2), pp 213-223
01 Jan 2013
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
This article examines the Credit Default Swap (CDS) spread index for three sectors, banking, financial services and insurance, in the short and long run. In the long run, the results show that the index of the insurance sector which sells the long term CDS contracts has the highest adjustment, while the banking sector is not error correcting. In the short run, although the insurance sector CDS spread index has general predictive power of all sector CDS spreads, the evidence suggests that the banking sector particularly leads the financial services and this in turn leads the insurance sector, implying a leading sector CDS pricing role for the banking spreads in the short run. The short run sensitivity Generalized Impulse Response Function (GIRF) and Generalized Variance Decomposition (GVDC) analyses also demonstrate that the sectors' credit risk responds more to credit events in the banking sector than in the other two sectors other than their own over a 50 day horizon. However, the lowest cross sector CDS shock impacts in the short run come from the insurance sector. These results are useful for regulators wishing to embark on new regulations of these financial institutions such as Basel III.
Metrics
Details
- Title
- Dynamics of CDS spread indexes of US financial sectors
- Creators
- Shawkat Hammoudeh - Drexel UniversityMohan Nandha - Monash UniversityYuan Yuan - Drexel University
- Publication Details
- Applied economics, v 45(2), pp 213-223
- Publisher
- Routledge
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000302004800006
- Scopus ID
- 2-s2.0-80052823319
- Other Identifier
- 991019167821104721
UN Sustainable Development Goals (SDGs)
This publication has contributed to the advancement of the following goals:
InCites Highlights
Data related to this publication, from InCites Benchmarking & Analytics tool:
- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Economics