 Abstract:
We focus on the link prevailing between credit default swap spreads and the U.S. financial market. We apply the Flexible Least Squares regression method to investigate the relationship between CDX spreads and Dow Jones Composite index return. We care about bad scenarios where a decrease in the U.S. market index triggers an increase in CDX spreads.
Authors:
Hayette GATFAOUI
JEL classification:
C22 G12
Keywords:
Correlation, credit risk, flexible least squares regression, market risk
Download locations
AFBC 2008 - Forthcoming in the Model Risk Evaluation HandBook (McGraw-Hill) - New extended and updated version named "MODEL RISK: CARING ABOUT STYLIZED FEATURES OF ASSET RETURNS! How does equity market influence credit default swap market?"
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1237582
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