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2016-12-29Diskussionpapier DOI: 10.18452/18558
Dynamic credit default swaps curves in a network topology
dc.contributor.authorXu, Xiu
dc.contributor.authorChen, Cathy Yi-Hsuan
dc.contributor.authorHärdle, Wolfgang K.
dc.date.accessioned2017-11-17T13:37:40Z
dc.date.available2017-11-17T13:37:40Z
dc.date.issued2016-12-29
dc.identifier.urihttp://edoc.hu-berlin.de/18452/19254
dc.description.abstractSystemically important banks are connected and have dynamic dependencies of their default probabilities. An extraction of default factors from cross-sectional credit default swaps (CDS) curves allows to analyze the shape and the dynamics of the default probabilities. Extending the Dynamic Nelson Siegel (DNS) model, we propose a network DNS model to analyze the interconnectedness of default factors in a dynamic fashion, and forecast the CDS curves. The extracted level factors representing long-term default risk demonstrate 85.5% total connectedness, while the slope and the curvature factors document 79.72% and 62.94% total connectedness for the short-term and middle-term default risk, respectively. The issues of default spillover and systemic risk should be weighted for the market participants with longer credit exposures, and for regulators with a mission to stabilize financial markets. The US banks contribute more to the long-run default spillover before 2012, whereas the European banks are major default transmitters during and after the European debt crisis either in the long-run or short-run. The outperformance of the network DNS model indicates that the prediction on CDS curve requires network information.eng
dc.language.isoeng
dc.publisherHumboldt-Universität zu Berlin
dc.subjectCDSeng
dc.subjectnetworkeng
dc.subjectdefault riskeng
dc.subjectvariance decompositioneng
dc.subjectrisk managementeng
dc.subject.ddc330 Wirtschaft
dc.titleDynamic credit default swaps curves in a network topology
dc.typeworkingPaper
dc.identifier.urnurn:nbn:de:kobv:11-110-18452/19254-3
dc.identifier.doihttp://dx.doi.org/10.18452/18558
local.edoc.container-titleSonderforschungsbereich 649: Ökonomisches Risiko
local.edoc.pages47
local.edoc.type-nameDiskussionpapier
local.edoc.institutionWirtschaftswissenschaftliche Fakultät
local.edoc.container-typeseries
local.edoc.container-type-nameSchriftenreihe
local.edoc.container-volume2016
local.edoc.container-issue59
local.edoc.container-erstkatid2195055-6

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