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dc.contributor.authorLafuente-Luengo, Juan Angel
dc.contributor.authorSerrano, Pedro
dc.date.accessioned2016-04-26T08:51:56Z
dc.date.available2016-04-26T08:51:56Z
dc.date.issued2015-03
dc.identifier.citationLAFUENTE, Juan Angel; SERRANO, Pedro. On the compensation for illiquidity in sovereign credit markets. Journal of Multinational Financial Management, 2015, vol. 30, p. 83-100.ca_CA
dc.identifier.urihttp://hdl.handle.net/10234/158947
dc.description.abstractThis article analyzes the role of liquidity in the sovereign credit default swap (CDS) market. We employ a continuous-time specification to incorporate illiquidity as an additional pricing factor of default swap contracts for the most developed economies. The illiquidity discount process is identified as compensation to investors for the risk of unwinding their positions when trading in the less liquid part of the curve, and the information about illiquidity is directly extracted from the term structure of sovereign CDS spreads. Our empirical findings reveal that a positive time-varying illiquidity premium is embedded in sovereign default swaps. These risk premia exhibit substantial comovement across countries. Only unidirectional causality from default to liquidity is detected for the overall market.ca_CA
dc.description.sponsorShipWe are exceptionally grateful to Jonatan Groba for his valuable comments and suggestions. J.A. Lafuente acknowledges financial support from the Spanish Ministry of Economy and Competitiveness through grant ECO2012-31941, the Generalitat Valenciana through grant PrometeoII/2013/015 and the University Jaume I through grant P1.1A2012-09. P. Serrano acknowl- edges financial support from the Spanish Ministry of Economy and Competitiveness through grant ECO2012-34268 and from Junta de Andalucía project P12-SEJ-1733.ca_CA
dc.format.extent17 p.ca_CA
dc.format.mimetypeapplication/pdfca_CA
dc.language.isoengca_CA
dc.publisherElsevierca_CA
dc.relation.isPartOfJournal of Multinational Financial Management Volume 30, March 2015ca_CA
dc.rightsCopyright © 2015 Elsevier B.V. All rights reserved.ca_CA
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/*
dc.subjectCredit default swapca_CA
dc.subjectIlliquidityca_CA
dc.subjectDefaultca_CA
dc.subjectRisk premiumca_CA
dc.titleOn the compensation for illiquidity in sovereign credit marketsca_CA
dc.typeinfo:eu-repo/semantics/articleca_CA
dc.identifier.doihttp://dx.doi.org/10.1016/j.mulfin.2015.03.003
dc.rights.accessRightsinfo:eu-repo/semantics/openAccessca_CA
dc.relation.publisherVersionhttp://www.sciencedirect.com/science/article/pii/S1042444X15000213ca_CA
dc.type.versioninfo:eu-repo/semantics/submittedVersion


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