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Are CDS spreads predictable? An analysis of linear and non-linear forecasting models
2014
International Review of Financial Analysis
This paper investigates the forecasting performance for CDS spreads of both linear and non-linear models by analysing the iTraxx Europe index during the financial crisis period which began in mid-2007. The statistical and economic significance of the models' forecasts are evaluated by employing various metrics and trading strategies, respectively. Although these models provide good in-sample performances, we find that the non-linear Markov switching models underperform linear models
doi:10.1016/j.irfa.2014.04.001
fatcat:cdpjxjnfungt3ayv3m7kr4z7km