CDS spreads and COVID-19 pandemic

Nicholas Apergis; Dan Danuletiu; Bing Xu

doi:10.1016/j.intfin.2021.101433

CDS spreads and COVID-19 pandemic

Nicholas Apergis, Dan Danuletiu, Bing Xu

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Abstract

US corporate credit default swap (CDS) spreads have significantly increased since the beginning of the COVID-19 global pandemic. This paper shows that the magnitude of the pandemic measured by the number of COVID-19 cases and deaths both in the US and globally are positively linked to the CDS spreads, an effect both economically and statistically significant. However, there is a significant heterogenous effects across sectors, in which banking, travel & leisure, transportation, airlines, and restaurants are the hardest hit sectors. The analysis also documents that the COVID-19 pandemic increases corporate CDS spreads via increased firms’ distress levels transmission channels.

Original language	English
Article number	101433
Journal	Journal of International Financial Markets, Institutions and Money
Volume	76
Early online date	18 Nov 2021
DOIs	https://doi.org/10.1016/j.intfin.2021.101433
Publication status	Published - Jan 2022

Keywords

COVID-19 pandemic
Credit default swap (CDS)
Distressed firms
US

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.intfin.2021.101433

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© 2021 Published by Elsevier B.V.
Accepted author manuscript, 428 KBLicence: CC BY-NC-ND

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AB - US corporate credit default swap (CDS) spreads have significantly increased since the beginning of the COVID-19 global pandemic. This paper shows that the magnitude of the pandemic measured by the number of COVID-19 cases and deaths both in the US and globally are positively linked to the CDS spreads, an effect both economically and statistically significant. However, there is a significant heterogenous effects across sectors, in which banking, travel & leisure, transportation, airlines, and restaurants are the hardest hit sectors. The analysis also documents that the COVID-19 pandemic increases corporate CDS spreads via increased firms’ distress levels transmission channels.

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CDS spreads and COVID-19 pandemic

Abstract

Keywords

ASJC Scopus subject areas

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