Limited Investment Capital and Credit Spreads

• 成果类型: Article
• 署名作者: Siriwardane, Emil N.
• 署名单位: Harvard University; Office of Financial Research; United States Department of the Treasury
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12777
• 发表日期: 2019
• 页码: 2303-2347
• 关键词: DEFAULT SWAP; RISK; determinants; MARKETS

摘要

Using proprietary credit default swap (CDS) data, I investigate how capital shocks at protection sellers impact pricing in the CDS market. Seller capital shocks-measured as CDS portfolio margin payments-account for 12% of the time-series variation in weekly spread changes, a significant amount given that standard credit factors account for 18% during my sample. In addition, seller shocks possess information for spreads that is independent of institution-wide measures of constraints. These findings imply a high degree of market segmentation, and suggest that frictions within specialized financial institutions prevent capital from flowing into the market at shorter horizons.