A1 - Virginie Coudert
A1 - Mathieu Gex
TI - Contagion in the Credit Default Swap Market: the case of the GM and Ford Crisis in 2005
IS - 2008-14
T3 - Working Papers
KW - Credit Default Swap
KW - Bond
KW - Equity
KW - Correlation
KW - Contagion
N2 - Has the General Motors (GM) and Ford crisis in 2005 spread to the whole credit default swap (CDS) market? To answer this question, we study the correlations between CDS premia, by using a sample of 226 CDSs on major US and European firms. We show that correlations significantly increased during the crisis, especially in the first week. We also test the links between markets at the firm level, using VECM and VAR models. The lead of the CDS market over the bond market appears to have weakened during the crisis. The links with the equity market were also mitigated.
ER -