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dc.contributor.authorKolokolova, Olgaen
dc.contributor.authorLin, Ming-Tsungen
dc.contributor.authorPoon, Ser-Huangen
dc.date.accessioned2018-09-05T08:40:47Z
dc.date.available2018-09-05T08:40:47Z
dc.date.issued2018-08-29
dc.identifier.citationKolokolova, O., Ming-Tsung, L., and Ser-Huang, P. (2018) Rating-based CDS curves, The European Journal of Finance,en
dc.identifier.urihttp://hdl.handle.net/2086/16534
dc.descriptionThe file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.en
dc.description.abstractThis paper explores the extent to which term structure of individual credit default swap (CDS) spreads can be explained by the firm’s rating. Using the Nelson–Siegel model, we construct, for each day, CDS curves from a cross-section of CDS spreads for each rating class. We find that individual CDS deviations from the curve tend to diminish over time and CDS spreads converge towards the fitted curves. The likelihood of convergence increases with the absolute size of the deviation. The convergence is especially stable if CDS spreads are lower relative to the rating-based curve. Trading strategies exploiting the convergence generate an average return of 3.7% (5-day holding period) and 9% (20-day holding period).en
dc.language.isoenen
dc.publisherRoutledgeen
dc.subjectCredit default swapen
dc.subjecttrading strategyen
dc.subjectCDS term structureen
dc.subjectcredit ratingen
dc.titleRating based CDS curvesen
dc.typeArticleen
dc.identifier.doihttps://doi.org/10.1080/1351847X.2018.1511441
dc.researchgroupFiBReen
dc.peerreviewedYesen
dc.funderN/Aen
dc.projectidN/Aen
dc.cclicenceCC-BY-NCen
dc.date.acceptance2018-08-09en


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