First Significant Digits and the Credit Derivative Market during the Financial Crisis

Hofmarcher, Paul and Hornik, Kurt ORCID: (2010) First Significant Digits and the Credit Derivative Market during the Financial Crisis. Research Report Series / Department of Statistics and Mathematics, 101. Institute for Statistics and Mathematics, WU Vienna University of Economics and Business, Vienna.


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In this letter we discuss the Credit Default Swap (CDS) market for European, Indian and US CDS entities during the financial crisis starting in 2007 using empirical First Significant Digit (FSD) distributions. We find out that on a time aggregated level the European and the US market obey empirical FSD distributions similar to the theoretical ones. Surprising differences are observed in the development of the FSD distributions between the US and the European market. While the FSD distribution of the US derivative market behaves nearly constant during the last financial crisis, we find huge fluctuations in the FSD distributions in the European market. One reason for these differences might be the possibility of a strategic default for US companies due to Chapter 11 and avoided contagion effects.

Item Type: Paper
Keywords: first significant digits / credit default swap / Benford Distribution
Divisions: Departments > Finance, Accounting and Statistics > Statistics and Mathematics
Depositing User: Repository Administrator
Date Deposited: 21 Jul 2010 11:51
Last Modified: 24 Oct 2019 13:41


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