The Determinants of CDS Spreads During the COVID-19 Pandemic
Abstract: This paper investigates the determinants of CDS spreads in the US, following the spread of the COVID-19 pandemic in early 2020. The pandemic led to an increased volatility and credit risk, as supply and demand suffered. By introducing measures related to COVID-19 we try to explain changes in CDS spreads in the US during the pandemic. The results show that the magnitude of the pandemic, measured by the number of COVID-19 cases, COVID-19 deaths and stringency index in the US, are linked to CDS spreads. However, we cannot prove all COVID-19 variables caused an increase in CDS spreads in all sectors.
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