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dc.contributor.authorHertrich, Markus
dc.date.accessioned2015-10-01T14:58:19Z
dc.date.available2015-10-01T14:58:19Z
dc.date.issued2015
dc.identifier.urihttp://hdl.handle.net/11654/6297
dc.description.abstractDuring the recent financial crisis that erupted in mid-2007, credit default swap spreads increased by several hundred basis points, accompanied by a liquidity shortage in the U.S. financial sector. This period has both evidenced the importance that liquidity has for investors and underlined the need to understand the linkages between credit markets and liquidity. This paper sheds light on the dynamic interactions between credit and liquidity risk in the credit default swap market. Contrary to the common belief that illiquidity leads to a credit risk deterioration in financial markets, it is found that in a sample of German and Swiss companies, credit risk is more likely to be weakly endogenous for liquidity risk than vice versa. The results suggest that a negative credit shock typically leads to a subsequent liquidity shortage in the credit default swap market, in the spirit of, for instance, the liquidity spiral posited by Brunnermaier (2009), and extends our knowledge about how credit markets work, as it helps to explain the amplification mechanisms that severely aggravated the recent crisis and also indicates which macro-prudential policies would be suitable for preventing a similar financial crisis in the future.
dc.language.isoen
dc.relation.ispartofInternational Journal of Applied Economics
dc.accessRightsAnonymous
dc.subjectfinancial crisis, credit default swap, credit risk, liquidity risk, endogeneity, macro-prudential policy
dc.subject.ddc330 - Wirtschaftde
dc.titleDoes Credit Risk Impact Liquidity Risk? Evidence from Credit Default Swap Markets
dc.type01 - Zeitschriftenartikel, Journalartikel oder Magazin
dc.volume12
dc.issue2
dc.audienceScience
fhnw.publicationStatePre-print in printing
fhnw.ReviewTypeAnonymous ex ante peer review of a complete publication
fhnw.InventedHereNo
fhnw.PublishedSwitzerlandNo
fhnw.paginationka
fhnw.IsStudentsWorkno


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