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Rating Announcements, CDS Spread and Volatility During the European Sovereign Crisis

This paper analyzes the evolution of CDS spread and CDS volatility around European sovereign rating announcements over the period 2008–13. We show that the effect of the announcement differs depending on the credit quality of the issuer (Investment Grade versus Speculative). The downgrading and nega...

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Detalles Bibliográficos
Autores principales: Raimbourg, Philippe, Salvadè, Federica
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier Inc. 2021
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7311340/
https://www.ncbi.nlm.nih.gov/pubmed/32837372
http://dx.doi.org/10.1016/j.frl.2020.101663
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author Raimbourg, Philippe
Salvadè, Federica
author_facet Raimbourg, Philippe
Salvadè, Federica
author_sort Raimbourg, Philippe
collection PubMed
description This paper analyzes the evolution of CDS spread and CDS volatility around European sovereign rating announcements over the period 2008–13. We show that the effect of the announcement differs depending on the credit quality of the issuer (Investment Grade versus Speculative). The downgrading and negative credit watch of an investment grade country stabilize the market, as volatility decreases right after their release. By contrast, the announcements regarding speculative grade countries trigger an increase in both CDS spread and volatility. Lastly, we show that these announcements not only affect the CDS of the country, but spill over the German CDS.
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spelling pubmed-73113402020-06-24 Rating Announcements, CDS Spread and Volatility During the European Sovereign Crisis Raimbourg, Philippe Salvadè, Federica Financ Res Lett Article This paper analyzes the evolution of CDS spread and CDS volatility around European sovereign rating announcements over the period 2008–13. We show that the effect of the announcement differs depending on the credit quality of the issuer (Investment Grade versus Speculative). The downgrading and negative credit watch of an investment grade country stabilize the market, as volatility decreases right after their release. By contrast, the announcements regarding speculative grade countries trigger an increase in both CDS spread and volatility. Lastly, we show that these announcements not only affect the CDS of the country, but spill over the German CDS. Elsevier Inc. 2021-05 2020-06-24 /pmc/articles/PMC7311340/ /pubmed/32837372 http://dx.doi.org/10.1016/j.frl.2020.101663 Text en © 2020 Elsevier Inc. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
spellingShingle Article
Raimbourg, Philippe
Salvadè, Federica
Rating Announcements, CDS Spread and Volatility During the European Sovereign Crisis
title Rating Announcements, CDS Spread and Volatility During the European Sovereign Crisis
title_full Rating Announcements, CDS Spread and Volatility During the European Sovereign Crisis
title_fullStr Rating Announcements, CDS Spread and Volatility During the European Sovereign Crisis
title_full_unstemmed Rating Announcements, CDS Spread and Volatility During the European Sovereign Crisis
title_short Rating Announcements, CDS Spread and Volatility During the European Sovereign Crisis
title_sort rating announcements, cds spread and volatility during the european sovereign crisis
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7311340/
https://www.ncbi.nlm.nih.gov/pubmed/32837372
http://dx.doi.org/10.1016/j.frl.2020.101663
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