Default and recovery implicit in the term structure of sovereign CDS spreads

• 成果类型: Article
• 署名作者: Pan, Jun; Singleton, Kenneth J.
• 署名单位: Massachusetts Institute of Technology (MIT); National Bureau of Economic Research; Stanford University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2008.01399.x
• 发表日期: 2008
• 页码: 2345-2384
• 关键词: yield spreads; models; Swaps; RISK

摘要

This paper explores the nature of default arrival and recovery implicit in the term structures of sovereign CDS spreads. We argue that term structures of spreads reveal not only the arrival rates of credit events (lambda(Q)), but also the loss rates given credit events. Applying our framework to Mexico, Turkey, and Korea, we show that a single-factor model with lambda(Q) following a lognormal process captures most of the variation in the term structures of spreads. The risk premiums associated with unpredictable variation in lambda(Q) are found to be economically significant and co-vary importantly with several economic measures of global event risk, financial market volatility, and macroeconomic policy.