Modeling Corporate CDS Spreads Using Markov Switching Regressions

Ovielt Baltodano López, Giacomo Bulfone, Roberto Casarin, Francesco Ravazzolo
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Abstract

This paper investigates the determinants of the European iTraxx corporate CDS index considering a large set of explanatory variables within a Markov switching model framework. The influence of financial and economic variables on CDS spreads are compared using linear, two, three, and four-regime models in a sample post-subprime financial crisis up to the COVID-19 pandemic. Results indicate that four regimes are necessary to model the CDS spreads. The fourth regime was activated during the COVID-19 pandemic and in high volatility periods. Further, the effect of the covariates differs significantly across regimes. Brent and term structure factors became relevant after the outbreak of the COVID-19 pandemic.
利用马尔科夫切换回归建立公司 CDS 利差模型
本文研究了欧洲 iTraxx 公司 CDS 指数的决定因素,在马尔科夫转换模型框架内考虑了大量解释变量。在次贷金融危机后至 COVID-19 大流行期间的样本中,使用线性、两制度、三制度和四制度模型比较了金融和经济变量对 CDS 利差的影响。结果表明,建立 CDS 利差模型需要四个制度。在 COVID-19 大流行期间和高波动率时期,第四机制被激活。此外,协变量对不同制度的影响也大不相同。在 COVID-19 大流行爆发后,布伦特和期限结构因素变得相关。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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