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Title: Does Economic Policy Uncertainty Drive CDS Spreads?
Authors: Wisniewski, Tomasz Piotr
Lambe, Brendan John
First Published: 9-Oct-2015
Publisher: Elsevier
Citation: International Review of Financial Analysis, 2015, 42, pp. 447–458
Abstract: This study analyzes the dynamic interactions between changes in economic policy uncertainty and the fluctuations in cost of credit protection. We find that the differenced iTraxx and CDX indices are Granger-caused by variations in the political environment. Within a Vector Autoregressive framework, impulse response functions show a significant reaction of the CDS spreads to shocks in the policy risk. Implied in these findings is the possibility that country-level risk can permeate to the corporations. Furthermore, financial institutions and traders should closely monitor political developments in order to better predict the CDS premia.
DOI Link: 10.1016/j.irfa.2015.09.009
ISSN: 1057-5219
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © 2015, Elsevier.
Description: The file associated with this record is under embargo until 18 months after publication, in accordance with the publisher's self-archiving policy. The full text may be available through the publisher links provided above.
Appears in Collections:Published Articles, School of Management

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