Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/27861
Authors: 
Almer, Thomas
Heidorn, Thomas
Schmaltz, Christian
Year of Publication: 
2008
Series/Report no.: 
Working paper series // Frankfurt School of Finance & Management 95
Abstract: 
This paper studies 'Stylised Facts' and 'Determinants' of short-and long-term CDS-spreads of banks. As short-term spreads we choose 6M-, as long-term spreads we choose 5Y-spreads. In the section 'Stylised Facts' we found that the correlation between short-and long-term spreads for the total period is high (97%). However, the correlation in sub-periods varies across all possible correlations. Particularly, spreads can have negative correlation. In contrast to [Covitz and Downing, 2007], we find high positive (Covitz/Downing: high negative) correlation for turbulent market circumstances. In the section 'Deteminants' we confirm the Merton-factors (stock price, stock price volatility, interest rate level) for the 5Y-segment, but not for the 6M-segment. Furthermore, we do not find any empirical support that short-term spreads are particularly sensitive to illiquidity factors. In that sense, we also contrast [Covitz and Downing, 2007].
Subjects: 
Liquidity
insolvency
banks
JEL: 
G32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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