Preferencje help
Widoczny [Schowaj] Abstrakt
Liczba wyników
2013 | 7 | nr 2 | 21--29
Tytuł artykułu

First Significant Digits and the Credit Derivative Market During the Financial Crisis

Treść / Zawartość
Warianty tytułu
Języki publikacji
The Credit Default Swap (CDS) market has both been lauded for its ability to stabilize the financial system through credit risk transfers and been the source of regulatory concern due to its size and lack of transparency. As a decentralized over-the-counter market, detailed information about pricing mechanisms is rather scarce. To investigate reported CDS prices (spreads) more closely, we make use of empirical First Significant Digit (FSD) distributions and analyze daily CDS prices for European and US entities during the financial crisis starting in 2007. We find that on a time-aggregated level, the European and US markets obey empirical FSD distributions similar to the theoretical ones. Surprising differences are observed in the development of the FSD distributions between the US and European markets. Whereas the FSD distribution of the US derivative market behaves nearly constantly during the last financial crisis, we find huge fluctuations in the FSD distribution of the European market. One reason for these differences might be the possibility of strategic default for US companies due to Chapter 11 and avoided contagion effects. (original abstract)
Opis fizyczny
  • Johannes Kepler University Linz, Austria
  • Vienna University of Economics and Business, Austria
  • Benford, F. (1938). The law of anomalous numbers. Proceedings of the American Philosophical Society, 78(4), 551-572.
  • Clippe, P., & Ausloos, M. (2012). Benford's law and Theil transform of financial data. Physica A: Statistical Mechanics and its Applications, 391(24) , 6556-6567.
  • Corazza, M., Ellero, A., & Zorzi, A. (2010). Checking financial markets via Benford's law: the S&P 500 case. In M. Corazza & C. Pizzi (Eds.), Mathematical and statistical methods for actuarial sciences and finance ( pp. 93 - 102). Milano: Springer.
  • DeCeuster, M. J. K., Dhaene, G., & Schatteman, T. (1998). On the hypothesis of psychological barriers in stock markets and Benford's Law. Journal of Empirical Finance, 5(3) , 263-279.
  • Dechert LLP. (2008, December 30). Derivatives Developments: Tackling the $50 Trillion Credit Default Swap Market and Beyond. Retrieved from swap_market_and_beyond_12-01-2008/
  • Depken, C. A. (2008). Benford, Zipf and the blogosphere. Applied Economics Letters, 15(9) , 689- 692.
  • Devenow, A., & Welch, I. (1996). Rational herding in financial economics. European Economic Review, 40(3-5), 603-615.
  • Forte, S., & Peña, J. I. (2009). Credit spreads: An empirical analysis on the informational content of stocks, bonds, and CDS. Journal of Banking and Finance, 33(11), 2013-2025.
  • George, J., & Laura, S. (2009). Detecting problems in survey data using Benford's Law. The Journal of Human Resources, 44(1), 1-24.
  • Giles, D. E. (2007). Benford's Law and naturally occurring prices in certain ebay auctions. Applied Economics Letters, 14(3), 157-161.
  • Greenspan, A. (2005, May 5). Remarks by Chairman Alan Greenspan. Retrieved from
  • Grendar, M., Judge, G. G., & Schechter, L. (2007). An empirical non-parametric likelihood family of data-based Benford-like distributions. Physica A: Statistical Mechanics and its Applications, 380(1 July 2007), 429-438.
  • Günnel, S., & Todter, K. H. (2009). Does Benford's Law hold in economic research and forecasting. Empirica, 36(3), 273-292.
  • Hill, T. P. (1995). A statistical derivation of the significant-digit law. Statistical Science, 10(4), 354-363.
  • Jorion, P., & Zhang, G. (2007). Good and bad credit contagion: Evidence from credit default swaps. Journal of Financial Economics, 84(3), 860-883.
  • Kuiper, N. H. (1960). Tests concerning random points on a circle. Proceedings of the Koninklijke Nederlandse Akademie van Wetenschappen - Series A, 63, 38-47.
  • Ley, E. (1996). On the peculiar distribution of the U.S. stock indexes' digits. The American Statistician, 50(4), 311-313.
  • Longstaff, F. A., Mithal, S., & Neis, E. (2005). Corporate yield spreads: Default risk or liquidity? New evidence from the credit default swap market. The Journal of Finance, 60(5), 2213-2253.
  • Park, A., & Sabourian, H. (2011). Herding and contrarian behavior in financial markets. Econometrica, 79 (4), 973-1026.
  • Realdon, M. (2008). Credit default swap rates and stock prices. Applied Financial Economics Letters, 4(4), 241-248.
  • Scott, P., & Fasli, M. (2001). Benford's Law: An empirical investigation and a novel explanation. Unpublished Manuscript.
  • Trichet, J. C. (2007, April 18). Some reflections on the development of credit derivatives. Retrieved from date/2007/html/sp070418.en.html
  • Tukey, J. W. (1972). Some graphic and semigraphic displays. In T. A. Bancroft (Ed.), Statistical Papers in Honor of George W. Snedecor (pp. 293-316). Arnes, IA: Iowa State University Press.
  • Varian, H. R., Morgan, J. A., Deaton, A. S., Cramer, E. M., & Bibby, J. (1972). Letters to the editor. The American Statistician, 26(3), 62-65.
Typ dokumentu
Identyfikator YADDA

Zgłoszenie zostało wysłane

Zgłoszenie zostało wysłane

Musisz być zalogowany aby pisać komentarze.
JavaScript jest wyłączony w Twojej przeglądarce internetowej. Włącz go, a następnie odśwież stronę, aby móc w pełni z niej korzystać.