Modeling Credit Contagion via the Updating of Fragile Beliefs

• 成果类型: Article
• 署名作者: Benzoni, Luca; Collin-Dufresne, Pierre; Goldstein, Robert S.; Helwege, Jean
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Chicago; Swiss Federal Institutes of Technology Domain; Ecole Polytechnique Federale de Lausanne; University of Minnesota System; University of Minnesota Twin Cities; National Bureau of Economic Research; University of California System; University of California Riverside
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhv018
• 发表日期: 2015
• 页码: 1960
• 关键词: term structure; default risk; spreads; doubts

摘要

We propose an equilibrium model for defaultable bonds that are subject to contagion risk. Contagion arises because agents with fragile beliefs are uncertain about the underlying economic state and its probability. Estimation on sovereign European credit default swaps (CDS) data shows that agents require a time-varying risk premium for bearing state uncertainty. The model outperforms affine specifications with the same number of state variables, suggesting that there are important nonlinearities in credit spreads that are captured by our model. Contagion drives most of the variation in CDS spreads, especially before the crisis. However, economic fundamentals account for a significant fraction during the crisis.