This paper analyses the pricing of systematic risk factors in credit default swap contracts in a two-stage empirical framework. In the first pass, we estimate contract specific sensitivities to several systematic risk factors by time-series regressions using quoted credit default swap (CDS) spreads of 339 U.S. entities from 2004 to 2010. We find that the...

This paper develops a framework to measure the exposure to systematic risk for pools of asset securitizations and measures empirically whether current ratings-based rules for regulatory capital of securitizations under Basel II and Basel III reflect this exposure.

The market volume of credit derivatives increased rapidly from $180 billion in 1996 to over $57 trillion in 2008 (BBA, 2006; BIS, 2010). This growth rate highlights the importance of these new instruments in nancial markets. Consequences of the global nancial crisis (GFC), e.g., the Lehman Brothers' bankruptcy in 2008, underline the challenge to aggregate...

The Global Financial Crisis exposed financial institutions to severe unexpected losses in relation to mortgage securitizations and derivatives. This paper finds that risk models such as ratings are exposed to a large degree of systematic risk and parameter uncertainty.