Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/122015
Authors: 
Dimpfl, Thomas Ernst Herbert
Peter, Franziska Julia
Year of Publication: 
2015
Series/Report no.: 
SFB 649 Discussion Paper 2015-035
Abstract: 
We examine price discovery in the Credit Default Swap and corporate bond market. By using a Markov switching framework we are able to analyze the dynamic behavior of the information shares during tranquil and crisis periods. The results show that price discovery takes place mostly on the CDS market. The importance of the CDS market even increases during the more volatile crisis periods. According to a cross sectional analysis liquidity is the main determinant of a market's contribution to price discovery. During the crisis period, however, we also find a positive link between leverage and CDS market information shares. Overall the results indicate that price discovery measures and their determinants change during tranquil and crisis periods, which emphasizes the importance of more exible frameworks, such as Markov switching models.
Subjects: 
Markov switching model
price discovery
credit risk
CDS
JEL: 
C14
G15
Document Type: 
Working Paper

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