I examine the effect of credit default swaps (CDSs) on the restructuring of distressed firms. Theoretically, I show that if bondholders are insured with CDSs, the participation rate in a restructuring decreases. Using a sample of distressed exchange offers, I estimate that the participation rate...

Correlated defaults and systemic risk are clearly priced in credit portfolio securities such as CDOs or index CDSs. In this paper we study an extensive CDX data set for evidence whether correlated defaults are also present in the underlying CDS market. We develop a cash flow based top-down...

Credit default swaps (CDS) provide the buyer with insurance against certain types of credit events by entitling him to exchange any of the bonds permitted as deliverable against their par value. Unlike bonds, whose risk spreads are assumed to be the product of default risk and loss rate, CDS are...