RT Report
T1 Looking through systemic credit risk: determinants, stress testing and market value
A1 Chamizo Cana, Álvaro
A1 Novales Cinca, Alfonso Santiago
AB We provide a methodology to estimate a Global Credit Risk Factor (GCRF) from CDS spreads using the information provided by the default-related component of observed spreads. These are previ- ously estimated using Pan and Singleton (2008) methodology. The estimated factor contains higher explanatory power on CDS spread fluctuations across sectors than standard credit indices like iTraxx or CDX. We find a positive association between GCRF and implied volatility variables, and a negative association with MSCI stock market sector indices as well as with interest rates and with the slope and the curvature of the term structure. Such correlations provide useful insights for risk management as well as for the hedging of credit portfolios. Indeed, we present a synthetic factor regression model for GCRF that we apply in a stress testing methodology for credit portfolios as well as to evaluate future credit risk scenarios. Finally, we show evidence suggesting that the exposure to systemic credit risk was priced in the market during the 2006-2015 period.
PB Fac. de Ciencias Económicas y Empresariales. Instituto Complutense de Análisis Económico (ICAE)
SN 2341-2356
YR 2019
FD 2019
LK https://hdl.handle.net/20.500.14352/17514
UL https://hdl.handle.net/20.500.14352/17514
LA eng
NO We thank Pedro Serrano for comments and suggestions on a previous version of the paper.Preprint submitted to Elsevier.	31st August 2019.
NO Banco de España
DS Docta Complutense
RD 7 abr 2025