美联储-违约集群风险溢价及其对跨市场资产定价的启示（英）-2023.8-32页_500kb

Default Clustering Risk Premium and its Cross-Market Asset Pricing Implications

Authors: Kiwoong Byun, Baeho Kim, Dong Hwan Oh
Year: 2023
Journal: Finance and Economics Discussion Series (FEDS)

Abstract
This paper examines the market-implied default clustering risk premium (DCRP) using data from CDS contracts and CDX index spreads. The DCRP measures the compensation demanded by investors for correlated defaults in a portfolio. By comparing multi-name CDX tranche spreads (particularly the senior tranche) with synthetically generated spreads from single-name CDS data, the authors estimate the time-series dynamics of the DCRP.

Key findings include:

1. The DCRP surged during the 2007-2009 Global Financial Crisis (GFC) and the COVID-19 pandemic, reflecting increased systemic risk concerns.
2. Post-GFC product restructuring (CDX Series 15) stabilized the DCRP, though it remained sensitive to systemic stress events.
3. Market participants incorporated DCRP into their asset pricing decisions, with U.S. equity investors demanding higher compensation during periods of financial stress (e.g., during contractions and stressed periods identified by indices like CFNAI, STLFSI, and OFRFSI). This effect was statistically significant even after controlling for Fama-French factors and momentum.
4. The DCRP acts as a time-varying risk factor, particularly relevant during financial distress, and has implications for both credit and equity markets.

Methodology:

• Data: Single-name CDS spreads and multi-name CDX index/tranche spreads (CDX.NA.IG).
• Model: Uses a structural credit risk model, geometric Brownian motion, and Monte Carlo simulations to generate reference tranche spreads, comparing them with market-traded CDX spreads to isolate the DCRP.
• Time Frame: September 2005 to March 2021, covering key systemic events.

Cross-Market Implications:
The study confirms that the DCRP serves as a transitory, procyclical risk factor in the equity market, with investors demanding compensation during financial distress. This provides insights into how systemic credit risk, as reflected in the credit derivatives market, influences stock market investments.