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What Does the CDS Market Imply for a U.S. Default?

Benzoni, Luca; Cabanilla, Christian; Cocco, Alessandro; … - 2023

We document the sharp increase in trading activity, gross and net notional outstanding, and overall premiums in the U.S. credit default swaps (CDS) market that took place during the 2023 debt ceiling episode. Unlike the periods leading up to the 2011 and 2013 debt ceiling events, we show that in...

Persistent link: https://www.econbiz.de/10014350983

Why do investors buy sovereign default insurance?

Augustin, Patrick; Sokolovski, Valeri; Subrahmanyam, … - 2016

We provide a comprehensive analysis of the determinants of trading in the sovereign credit default swaps (CDS) market, using weekly data for single-name sovereign CDS from October 2008 to September 2015. We describe the anatomy of the sovereign CDS market, derive a law of motion for gross...

Persistent link: https://www.econbiz.de/10011541398

Pitfalls of central clearing in the presence of systematic risk

Kubitza, Christian; Pelizzon, Loriana; Getmansky, Mila - 2019

Through the lens of market participants' objective to minimize counterparty risk, we investigate central clearing in … suggest that central clearing always reduces counterparty risk for a sufficiently large number of clearing members. We show … that this is not the case - mostly because of loss sharing. Central clearing can increase counterparty risk, particularly …

Persistent link: https://www.econbiz.de/10012062171

How does risk flow in the credit default swap market?

D'Errico, Marco; Battiston, Stefano; Peltonen, Tuomo; … - 2017

We develop a framework to analyse the Credit Default Swaps (CDS) market as a network of risk transfers among counterparties. From a theoretical perspective, we introduce the notion of flow-of-risk and provide sufficient conditions for a bow-tie network architecture to endogenously emerge as a...

Persistent link: https://www.econbiz.de/10011636198

How does risk flow in the credit default swap market?

D'Errico, Marco; Battiston, Stefano; Peltonen, Tuomo; … - 2016

Persistent link: https://www.econbiz.de/10011975749

The Liquidity of Credit Default Index Swap Networks

Haynes, Richard - 2019

Recent regulatory reforms like the mandatory clearing of standardized swap contracts and mandatory trading on …

Persistent link: https://www.econbiz.de/10012871667

Debt Rollover Risk, Credit Default Swap Spread and Stock Returns : Evidence from the COVID-19 Crisis

Liu, Ya - 2020

This paper studies how the COVID-19 shock affects the CDS spread changes and abnormal stock returns of U.S. firms with different levels of debt rollover risk. We use the COVID-19 crisis as a quasi-natural experiment of adverse cash flow shock that increases the default risk of firms facing an...

Persistent link: https://www.econbiz.de/10012832300

CDO Pricing with Copulae

Choroś-Tomczyka, Barbara - 2017

Modeling the portfolio credit risk is one of the crucial issues of the last years in the financial problems. We propose the valuation model of Collateralized Debt Obligations based on a one- and two-parameter copula and default intensities estimated from market data. The presented method is used...

Persistent link: https://www.econbiz.de/10012966277

CDO and Structured Financial Products : A Modeling Perspective

Tapiero, Charles S. - 2010

This paper is intended as a pedagogical note to explain CDO and structured financial credit products modeling and some approaches to their pricing. The authors thank the NYU-Polytechnic Institute for the research support through the department of Finance and Risk Engineering and the Topfer Chair

Persistent link: https://www.econbiz.de/10013141159

Credit Default Swaps and Systemic Risk

Cont, Rama - 2014

We present a network model for investigating the impact on systemic risk of central clearing of over the counter (OTC … banks and use this model to investigate the impact of central clearing on network stability. We find that, when interest … rate swaps are cleared, central clearing of credit default swaps through a well-capitalized CCP can reduce the probability …

Persistent link: https://www.econbiz.de/10013048349