The Determinants of European CDS Spreads

Student: Ershov Daniil

Supervisor: Victor A Lapshin

Faculty: International College of Economics and Finance

Educational Programme: Double degree programme in Economics of the NRU HSE and the University of London (Bachelor)

Year of Graduation: 2021

This paper examines the factors that affect the CDS spreads of the main Eurozone countries. Weekly data from 2016 to 2021 are analyzed. In total, 10 variables and 7 countries (Germany, France, Belgium, Greece, Spain, Portugal, Italy) are analyzed. PCA and ICA methods were used for the analysis. According to the results of the analysis, the ICA method proved to be relatively more flexible. It has also been proven that during a crisis, most financial variables move in one direction (including CDS spreads which can be explained by those factors), while in calmer times, local factors predominate. It was also noted that the spreads of the peripheral countries were highly dependent on global factors in both periods (before and during the crisis).

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