Credit default swaps: what are these products and what influences its prices?
Autor(a) principal: | |
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Data de Publicação: | 2017 |
Tipo de documento: | Dissertação |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10362/26974 |
Resumo: | This thesis starts by describing credit default swaps (CDS), their benefits, costs, and how the market for these credit derivatives has been evolving in the past years. The main question that this thesis aims to answer is what are the factors that influence the prices of these financial products. The period under analysis goes from January 2006 to December 2016, and a sample of 72 European non-financial companies has been used. Through an econometric study using panel data regressions, the three theoretical determinants – leverage, risk-free rate and volatility - proposed by Merton’s model are firstly tested. All variables are found to be statistically significant but the low explanatory power of this regression (14.88%) suggests there are other factors influencing CDS prices. By considering additional variables accounting for firm, market and liquidity factors, the explanatory power of all determinants more than doubled (34.33%). In addition, there is a multi-period analysis where all the determinants are analysed in different periods of the whole sample to check for changes in their significance. The main conclusion is that the theoretical determinants have rather limited power when explaining CDS prices and therefore other variables should be, though carefully, considered. In addition, not all variables have always had the same significance when explain CDS price changes. This thesis ends with a consideration of its limitations, and some suggestions to overcome these issues. I would like to sincerely thank both my thesis supervisors, professor João Pereira from Nova School of Business and Economics and professor Luc Henrard from the Louvain School of Management for their help, advices and availability throughout this project. |
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Credit default swaps: what are these products and what influences its prices?Credit default swapsCDS spreadsStructural modelsExplanatory variablesMerton’s modelRegressionsDomínio/Área Científica::Ciências Sociais::Economia e GestãoThis thesis starts by describing credit default swaps (CDS), their benefits, costs, and how the market for these credit derivatives has been evolving in the past years. The main question that this thesis aims to answer is what are the factors that influence the prices of these financial products. The period under analysis goes from January 2006 to December 2016, and a sample of 72 European non-financial companies has been used. Through an econometric study using panel data regressions, the three theoretical determinants – leverage, risk-free rate and volatility - proposed by Merton’s model are firstly tested. All variables are found to be statistically significant but the low explanatory power of this regression (14.88%) suggests there are other factors influencing CDS prices. By considering additional variables accounting for firm, market and liquidity factors, the explanatory power of all determinants more than doubled (34.33%). In addition, there is a multi-period analysis where all the determinants are analysed in different periods of the whole sample to check for changes in their significance. The main conclusion is that the theoretical determinants have rather limited power when explaining CDS prices and therefore other variables should be, though carefully, considered. In addition, not all variables have always had the same significance when explain CDS price changes. This thesis ends with a consideration of its limitations, and some suggestions to overcome these issues. I would like to sincerely thank both my thesis supervisors, professor João Pereira from Nova School of Business and Economics and professor Luc Henrard from the Louvain School of Management for their help, advices and availability throughout this project.Pereira, JoãoHenrard, LucRUNNeves, Nuno Miguel Barreira Gomes2017-12-19T14:27:55Z2017-09-202017-09-20T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfhttp://hdl.handle.net/10362/26974TID:201756307enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-03-11T04:14:12Zoai:run.unl.pt:10362/26974Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-20T03:28:35.532362Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Credit default swaps: what are these products and what influences its prices? |
title |
Credit default swaps: what are these products and what influences its prices? |
spellingShingle |
Credit default swaps: what are these products and what influences its prices? Neves, Nuno Miguel Barreira Gomes Credit default swaps CDS spreads Structural models Explanatory variables Merton’s model Regressions Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
title_short |
Credit default swaps: what are these products and what influences its prices? |
title_full |
Credit default swaps: what are these products and what influences its prices? |
title_fullStr |
Credit default swaps: what are these products and what influences its prices? |
title_full_unstemmed |
Credit default swaps: what are these products and what influences its prices? |
title_sort |
Credit default swaps: what are these products and what influences its prices? |
author |
Neves, Nuno Miguel Barreira Gomes |
author_facet |
Neves, Nuno Miguel Barreira Gomes |
author_role |
author |
dc.contributor.none.fl_str_mv |
Pereira, João Henrard, Luc RUN |
dc.contributor.author.fl_str_mv |
Neves, Nuno Miguel Barreira Gomes |
dc.subject.por.fl_str_mv |
Credit default swaps CDS spreads Structural models Explanatory variables Merton’s model Regressions Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
topic |
Credit default swaps CDS spreads Structural models Explanatory variables Merton’s model Regressions Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
description |
This thesis starts by describing credit default swaps (CDS), their benefits, costs, and how the market for these credit derivatives has been evolving in the past years. The main question that this thesis aims to answer is what are the factors that influence the prices of these financial products. The period under analysis goes from January 2006 to December 2016, and a sample of 72 European non-financial companies has been used. Through an econometric study using panel data regressions, the three theoretical determinants – leverage, risk-free rate and volatility - proposed by Merton’s model are firstly tested. All variables are found to be statistically significant but the low explanatory power of this regression (14.88%) suggests there are other factors influencing CDS prices. By considering additional variables accounting for firm, market and liquidity factors, the explanatory power of all determinants more than doubled (34.33%). In addition, there is a multi-period analysis where all the determinants are analysed in different periods of the whole sample to check for changes in their significance. The main conclusion is that the theoretical determinants have rather limited power when explaining CDS prices and therefore other variables should be, though carefully, considered. In addition, not all variables have always had the same significance when explain CDS price changes. This thesis ends with a consideration of its limitations, and some suggestions to overcome these issues. I would like to sincerely thank both my thesis supervisors, professor João Pereira from Nova School of Business and Economics and professor Luc Henrard from the Louvain School of Management for their help, advices and availability throughout this project. |
publishDate |
2017 |
dc.date.none.fl_str_mv |
2017-12-19T14:27:55Z 2017-09-20 2017-09-20T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/masterThesis |
format |
masterThesis |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10362/26974 TID:201756307 |
url |
http://hdl.handle.net/10362/26974 |
identifier_str_mv |
TID:201756307 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
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openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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1799137911184031744 |