We examine whether CDS contracts written on individual banks are effective leading indicators of bank financial distress during a period of systemic bank crisis. Changes in CDS spreads are found to yield a robust signal of failure across a set of European and US banks, in keeping with indirect...

We propose a statistical measure, based on correlation networks, to evaluate the systemic risk that could arise from the resolution of a failing or likely-to-fail financial institution, under three alternative scenarios: liquidation, private recapitalization, or bail-in. The measure enhances the...

We analyze how Credit Default Swaps (CDS) affect bank incentives and borrower outcomes in renegotiations after covenant violations. Using a regression-discontinuity design and within lender-borrower variation, we find that CDS firms maintain investment after control rights shift to the creditor,...