In this paper, we report a descriptive investigation of the structural evolution of two of the most important over-the-counter markets for liquidity in Germany: the interbank market for credit and for derivatives. We use end-of-quarter data from the German large credit register between 2002 and...

Lenders can transfer credit risk by purchasing credit default swaps (CDS), but holding swaps can diminish their incentives to monitor borrowers. Contracting theory predicts that lenders demand conservatism, in particular asymmetric timeliness of loss recognition, to effectively monitor...

This study examines the potential risk reducing benefits of credit default swaps (CDS) against risk in U.S. stock market sectors from 2004-2011. Tests of GARCH dynamic conditional correlation coefficients indicate that CDS serve as an effective hedge against risk in all stock sectors. CDS also...

We develop a model of endogenous collateral requirements in the credit default swap (CDS) market. Our model provides an interpretation for the empirical findings of Capponi et al. (2020), according to which extreme tail risk measures have a higher explanatory power for observed collateral...

We construct a novel U.S. data set that matches bank holding company credit default swap (CDS) positions to detailed U.S. credit registry data containing both loan and corporate bond holdings to study the effects of banks' CDS use on corporate credit quality. Banks may use CDS to mitigate agency...

The emergence and persistence of basis spreads in cross-currency basis swaps (CCBSs) since the global financial crisis have become a mystery in international finance, as they violate the longstanding principle of covered interest parity (CIP). We argue that the phenomenon is no mystery but...

We develop a tractable partial equilibrium model to analyze the impact on the bond market generated by a ban on naked credit default swaps. We demonstrate that such a ban will have a negligible impact on the borrowing costs if CDS speculators are risk averse and take positions which are small...

The purpose of this paper is to study the impact of beating analysts' forecasts and the impact of analysts' forecast dispersion on the pricing of firms' credit default swaps (CDSs). CDS premium is the compensation required by investors for bearing firms' credit default risk. Sell-side analysts...

This paper investigates whether the initiation of trading in credit default swaps (CDSs) on a borrowing firm's outstanding debt is associated with a decline in that firm's reporting conservatism. CDS investments can modify lenders' payoffs on their loan portfolios by providing insurance on...

I explore the relationship between financial frictions and asset prices in a closed economy model, and study the implications for the leverage cycle of financial intermediaries. I develop a continuous-time dynamic macroeconomic model with heterogeneous agents and limited stock market...