RT Generic
T1 Are There Arbitrage Opportunities in Credit Derivatives Markets? A New Test and an Application to the Case of CDS and ASPs
A1 Mayordomo, Sergio
A1 Peña, Juan Ignacio
A1 Romo, Juan
A2 Universidad Carlos III de Madrid. Departamento de Economía de la Empresa, 
AB This paper analyzes possible arbitrage opportunities in credit derivatives markets using selffinancing strategies combining Credit Default Swaps and Asset Swaps Packages. We present a new statistical arbitrage test based on the subsampling methodology which has lower Type I error than existing alternatives. Using four different databases covering the period from 2005 to 2009, long-run (cointegration) and statistical arbitrage analysis are performed. Before the subprime crisis, we find long-run arbitrage opportunities in 26% of the cases and statistical arbitrage opportunities in 24% of the cases. During the crisis, arbitrage opportunities decrease to 8% and 19%, respectively. Arbitrage opportunities are more frequent in the case of relatively low rated bonds and bonds with a high coupon rate.
YR 2009
FD 2009-09
LK https://hdl.handle.net/10016/5294
UL https://hdl.handle.net/10016/5294
LA eng
DS e-Archivo
RD 7 may. 2024