Journal of
Italian
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year 100
Italian
Banking
Association
year 100
Forum | Papers » Are Cds spreads a good proxy of bank risk? Evidence from the recent financial crisis
Are Cds spreads a good proxy of bank risk? Evidence from the recent financial crisis
Laura Chiaramonte, Barbara CasuNovember 2011 - n°11
Jel codes: G01, G21
The bankruptcy of Lehman Brothers in September 2008 and, shortly afterwards, the near downfall of the insurance conglomerate American International Group (Aig), both of which were heavily involved in the Cds sector, polarised attention towards the Cds activities of the major international banks. Based on a sample of internationally active banks over the period 2005 - March 2010, this paper investigates the relationship between Cds spreads and bank balance sheet ratios.The results of the empirical analysis indicate that bank Cds spreads reflect the risk captured by bank balance sheet ratios.
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