This paper studies the reactions of Credit Default Swap (CDS) to rating announcements. Credit rating agencies make multiple announcements, some of which are intended to reflect the latest information available about a firm and others to provide a stable signal of credit quality. Applying event study methodology to data on CDS, we examine whether these markets respond to rating announcements. Since CDS quotes are considered the market price of credit risk, we assume they should show prompt reactions to the changes in credit quality of the reference firm. The aim of the paper is to show how the CDS market may provide timely signs of increased credit risk and may represent a crucial tool for risk measurement and management.

Credit Default Swaps and Rating Announcements / D'Ecclesia, RITA LAURA; Castellano, R.. - In: THE JOURNAL OF FINANCIAL DECISION MAKING. - ISSN 1790-4870. - STAMPA. - 6:(2011), pp. 234-256.

Credit Default Swaps and Rating Announcements

D'ECCLESIA, RITA LAURA;
2011

Abstract

This paper studies the reactions of Credit Default Swap (CDS) to rating announcements. Credit rating agencies make multiple announcements, some of which are intended to reflect the latest information available about a firm and others to provide a stable signal of credit quality. Applying event study methodology to data on CDS, we examine whether these markets respond to rating announcements. Since CDS quotes are considered the market price of credit risk, we assume they should show prompt reactions to the changes in credit quality of the reference firm. The aim of the paper is to show how the CDS market may provide timely signs of increased credit risk and may represent a crucial tool for risk measurement and management.
2011
CDs; rating announcement; event study methodology
01 Pubblicazione su rivista::01a Articolo in rivista
Credit Default Swaps and Rating Announcements / D'Ecclesia, RITA LAURA; Castellano, R.. - In: THE JOURNAL OF FINANCIAL DECISION MAKING. - ISSN 1790-4870. - STAMPA. - 6:(2011), pp. 234-256.
File allegati a questo prodotto
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11573/66501
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus ND
  • ???jsp.display-item.citation.isi??? ND
social impact