We analyze the default swap market with the two factor I2 structural model, which is driven by firm value and firm leverage. As we show empirically, the default swap market incorporates these risks differentially over time, by region, by industry, and by coarse quality. This leads us to pool...

We evaluate several long/short strategies for managing a portfolio of default swaps. The strategies are based on a ranking of credits by residuals, which are the differences between market spreads and spreads generated by the iSpread structural model. Investment grade portfolios for the U.S. and...