The Influence of Political Risk on CDS Spreads - Differences between banks and other large firms
(2017) NEKN02 20171Department of Economics
- Abstract (Swedish)
- This thesis investigates the influence of country-specific political risk on credit default swap spreads. The research includes a sample of 30 companies over a time period of more than 13 years. The companies are divided into two sets of sub-groups, dependent on whether they are banks or not and which country they are based in. The hypothesis is that banks should be more influenced by political risk than non-banks, due to bail-out commitments from the government. Further, we investigate if there are any tendencies towards a difference in significance of political risk on CDS spreads between high and low-risk countries. The results from our regressions show lack of statistical significance to support our initial hypothesis. We believe that... (More)
- This thesis investigates the influence of country-specific political risk on credit default swap spreads. The research includes a sample of 30 companies over a time period of more than 13 years. The companies are divided into two sets of sub-groups, dependent on whether they are banks or not and which country they are based in. The hypothesis is that banks should be more influenced by political risk than non-banks, due to bail-out commitments from the government. Further, we investigate if there are any tendencies towards a difference in significance of political risk on CDS spreads between high and low-risk countries. The results from our regressions show lack of statistical significance to support our initial hypothesis. We believe that this may be partly due to insufficient data for the political risk proxies, which tend to be either infrequent or irrelevant. However, we observe some tendencies that support our hypothesis when investigating the sign and values of the beta-coefficients, as well as when lagging the political risk measurement forward. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/8913799
- author
- Tingåker, Ludvig LU and Bengtsson, Johan LU
- supervisor
- organization
- course
- NEKN02 20171
- year
- 2017
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- credit default swaps, political risk, credit risk, banks, Merton model
- language
- English
- id
- 8913799
- date added to LUP
- 2017-06-13 15:18:06
- date last changed
- 2017-06-13 15:18:06
@misc{8913799, abstract = {{This thesis investigates the influence of country-specific political risk on credit default swap spreads. The research includes a sample of 30 companies over a time period of more than 13 years. The companies are divided into two sets of sub-groups, dependent on whether they are banks or not and which country they are based in. The hypothesis is that banks should be more influenced by political risk than non-banks, due to bail-out commitments from the government. Further, we investigate if there are any tendencies towards a difference in significance of political risk on CDS spreads between high and low-risk countries. The results from our regressions show lack of statistical significance to support our initial hypothesis. We believe that this may be partly due to insufficient data for the political risk proxies, which tend to be either infrequent or irrelevant. However, we observe some tendencies that support our hypothesis when investigating the sign and values of the beta-coefficients, as well as when lagging the political risk measurement forward.}}, author = {{Tingåker, Ludvig and Bengtsson, Johan}}, language = {{eng}}, note = {{Student Paper}}, title = {{The Influence of Political Risk on CDS Spreads - Differences between banks and other large firms}}, year = {{2017}}, }