[2013년 제 1차] Liquidity Basis between Credit Default Swaps and Co
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2013-03-04
Liquidity risk has drawn much attention among academic researchers, institutional professionals and financial regulators in various financial markets. This paper empirically investigates the difference and relationship between the price and liquidity of CDS and corporate bond markets. Despite our initial conjecture of less significant liquidity risk in CDS market, CDS or bond markets do not exhibit dominant effect on another in terms of price discovery process, and no evidence is found that new information is impounded into one market more rapidly than another market. However, the Granger causality tests show someevidence of a bi-directional relationship between CDS and bond markets. In addition, the bond yield spread is slightly greater than CDS spread on average, and the bond market exhibits more illiquidity than that CDS market most of time during the sample period over all rating categories.