The integration ofcredit default swapmarkets in the pre andpost-subprime crisis incommon stochastic trends

Cathy Yi-Hsuan Chen, Wolfgang Karl Härdle & Hien Pham-Thu
It was evident that credit default swap (CDS) spreads have been highly correlated during the recent financial crisis. Motivated by this evidence, this study attempts to investigate the extent to which CDS markets across regions, maturities and credit ratings have integrated more in crisis. By applying the Panel Analysis of Non-stationarity in Idiosyncratic and Common components method (PANIC) developed by Bai and Ng (2004), we observe a potential shift in CDS integration between the pre-...
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