INFORMATION VALUE OF THE CREDIT RATING ON THE CREDIT DEFAULT SWAPS MARKET

Abstract

The paper examines the impact of the countries’ credit ratingschanges on the cost of credit defaults swaps premium. It is assumed statisticalsignificance abnormal returns due to changes in credit ratings assignedby the agencies. It is has been put the hipothesis that ratings events convey newinformation and lead to significant abnormal reactions. The study usedthe ratings assigned by Standard & Poor's and Moody's for the period fromJanuary 2005 to November 2015 and spreads for five-year senior unsecuredCDS. To verify the hypothesis the event study method (by daily data) isapplied.