| Author: | Skinner, F.S. Townend, T.G. |
| Title: | An empirical analysis of credit default swaps |
| Journal: | International Review of Financial Analysis
2002 : VOL. 11:3, p. 297-309 |
| Index terms: | Stock markets Credit management Risk Swaps Pricing Option prices Models |
| Language: | eng |
| Abstract: | This article represents the first empirical examination of credit default swaps. The paper appeals to corporate and option pricing theory to argue that credit default swaps are actually put options. A linear regression model is suggested, containing five variables that are important for pricing standard options. This empirical model shows that at least three, possibly four of these same variables are also important in pricing credit default swaps. Interestingly, it is found among others that swap participants appear to manipulate the variables under their control to structure the amount of credit risk that is traded. |
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