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Rating Announcements, CDS Spread and Volatility During the European Sovereign
Crisis
#MMPMID32837372
Raimbourg P
; Salvadè F
Financ Res Lett
2021[May]; 40
(?): 101663
PMID32837372
show ga
This paper analyzes the evolution of CDS spread and CDS volatility around
European sovereign rating announcements over the period 2008-13. We show that the
effect of the announcement differs depending on the credit quality of the issuer
(Investment Grade versus Speculative). The downgrading and negative credit watch
of an investment grade country stabilize the market, as volatility decreases
right after their release. By contrast, the announcements regarding speculative
grade countries trigger an increase in both CDS spread and volatility. Lastly, we
show that these announcements not only affect the CDS of the country, but spill
over the German CDS.