In this study, the authors shed light upon the nature and degree of market risk inherent in CDS instruments, and consequently offer suggestions to the regulators with regard to the level of regulatory reserves that ought to be mandated to avert extreme disasters or meltdowns in the future. If...

This paper is aimed at analyzing the interdependency between American and European Credit Default Swap (CDS) Indices markets from June 2004 to April 2009. For this exercise, the author has chosen the two most liquid Investment-Grade (IG) CDS indices: CDX.NA.IG of North America & iTraxx.Europe of...

This paper is aimed at testing for nonlinearity and chaos in Investment Grade CDS Indices of US and Europe. For this exercise, the author has chosen the two most liquid indices, namely CDX.NA.IG (US) and iTraxx.Europe (Europe). BDS test (Brock, Dechert, & Scheinkman, 1987) is employed to test...