Dynamic Dependence and Diversification in Corporate Credit

Peter Christoffersen, Kris Jacobs, Xisong Jin, Hugues Langlois

Research output: Contribution to journalJournal articleResearchpeer-review


We characterize dependence in corporate credit and equity returns for 215 firms using a new class of large-scale dynamic copula models. Copula dependence and especially tail dependence are highly variable and persistent, increase significantly in the financial crisis, and have remained high since. The most drastic increases in credit dependence occur in July/August of 2007 and in August of 2011 and the decrease in diversification potential caused by the increases in dependence and tail dependence is large. Credit default swap correlation dynamics are important determinants of credit spreads.
Original languageEnglish
JournalReview of Finance
Issue number2
Pages (from-to)521-560
Number of pages40
Publication statusPublished - 2018


  • Asset pricing
  • Trading volume
  • Bond interest rates

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