PT  - JOURNAL ARTICLE
AU  - Kenneth N. Daniels
AU  - Malene Shin Jensen
TI  - The Effect of Credit Ratings on Credit Default Swap Spreads and Credit Spreads
AID  - 10.3905/jfi.2005.605421
DP  - 2005 Dec 31
TA  - The Journal of Fixed Income
PG  - 16--33
VI  - 15
IP  - 3
4099  - https://pm-research.com/content/15/3/16.short
4100  - https://pm-research.com/content/15/3/16.full
AB  - This article investigates empirically the relationship between credit spreads and credit default swap spreads and how these spreads react to changes in credit ratings. The authors’ findings suggest a clear relationship between the two spreads and that credit rating and macroeconomic factors add significant information to this relationship. Furthermore, both spreads react to changes in credit ratings, and in particular to downgrades. The authors discover anticipated and lagged effects of changes in credit rating and differences between investment grades. Interestingly, the CDS market seems to react faster and more significantly than the bond market to changes in credit ratings.