Abstract
We investigate the determinants of sovereign CDS spreads on a sample of Eastern European data. A dynamic hierarchical factor model is used to aggregate information in indicators of economic fundamentals. CDS spreads are regressed on forecasts of factors. We find that domestic fundamentals explain more of CDS spread variance than global factors, largely due to their ability to explain differences in sovereign risk across countries. The effects on CDS spreads are found to be time-varying. In terms of economic significance, the factor of institutional-political strength stands out. We apply the model to study CDS spreads of Poland, Russia and Turkey.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
