What determines bank CDS spreads? Evidence from European banks
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We examine the determinants of CDS spreads for a sample of European and US banks. The key balance sheet determinants are leverage, asset quality, funding stability, and bank size, and the key market determinants are equity returns, the term structure of interest rates and bank-specific and host country sovereign credit risk. Our results would appear to con- firm the applicability of Merton (1974)-type models extended to include market variables to the understanding of bank credit risk.
| Original language | English |
|---|---|
| Pages (from-to) | 140-145 |
| Journal | Finance Research Letters |
| Volume | 22 |
| Issue number | 8 |
| Early online date | 3 Jan 2017 |
| DOIs | |
| Publication status | Published - Aug 2017 |