Is the CDS market liquid? Researchers claim that CDS market is liquid and thus the spreads reflect pure default risk. We investigate this claim. Since it is hard to measure liquidity precisely, we use an event study when a CDS is included into the CDX index. This event changes the liquidity of...

Default correlation is a concern especially after witnessing the financial crisis. To find default correlations, we would like to know asset correlations which are unobservable. In this paper we derive a model to infer asset correlations from Credit Default Swaps (CDSs). We use a structural...