Equity Prices, Credit Default Swaps, and Bond Spreads in Emerging Markets

Author/Editor:

Jorge A Chan-Lau ; Yoon Sook Kim

Publication Date:

February 1, 2004

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper examines equilibrium price relationships and price discovery between credit defaul swap (CDS), bond, and equity markets for emerging market sovereign issuers. Findings suggest that CDS and bond spreads converge despite various pressures that arise in the market. In most countries, however, we do not find any equilibrium price relationship between the bond and CDS markets and the equity markets. As for price discovery, our results are mixed. This stands in contrast to the empirical findings on corporate issuers in the United States and Europe.

Series:

Working Paper No. 2004/027

Subject:

Credit Credit default swap Emerging and frontier financial markets Financial markets Financial services Money Securities markets Yield curve

English

Publication Date:

February 1, 2004

ISBN/ISSN:

9781451844559/1018-5941

Stock No:

WPIEA0272004

Pages:

31

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