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Using data for 54 countries over a 12‐year period, we find that the variation in average sovereign ratings in a given year can be explained by average credit default swap… Click to show full abstract
Using data for 54 countries over a 12‐year period, we find that the variation in average sovereign ratings in a given year can be explained by average credit default swap (CDS) spreads over the previous three years. In a horse race between CDS spreads and sovereign ratings, we find that CDS spread changes can predict sovereign events, while rating changes cannot. The predictability of CDS spreads is greater when there is disagreement between Moody's and the S&P for a country's rating.
Keywords:
cds spreads;
measuring sovereign;
sovereign;
risk cds;
sovereign risk;
credit
Journal Title: Financial Management
Year Published: 2019
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Journal Title: Financial Management
Year Published: 2019
Link to full text (if available)
Share on Social Media: Sign Up to like & get
recommendations!