unexpected persistence of the dislocation between bond and derivative credit markets. We show that the first two moments of the …We reinvestigate the CDS-bond basis negativity puzzle after the financial crisis. This puzzle is defined as the … cross-sectional variation of the CDS-bond basis in each regime. Using a model with several limit-to-arbitrage factors, we …

credit spreads during 2002-2012: a liquidity regime and a default regime. Both regimes contribute to the patterns observed in … credit spreads. The liquidity regime seems to explain the predictive power of credit risk on the 2007-2009 NBER recession …, whereas the default regime drives the persistence of credit spreads over the same recession. Our results complement the recent …