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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

What does the CDS market imply for a U.S. default?

Benzoni, Luca; Cabanilla, Christian; Cocco, Alessandro; … - 2023 - Revised: May 17, 2023

As the debt ceiling episode unfolds, we highlight a sharp increase in activity across the U.S. credit default swaps (CDS) market and infer the likelihood of a U.S. default from these market prices. Beginning in January 2023, we document a significant increase in U.S. CDS trading activity and...

Persistent link: https://www.econbiz.de/10014249852

A Value at Risk Analysis of Credit Default Swaps

Raunig, Burkhard - 2016

letzten Jahren den Handel mit Kreditrisiko signifikant vereinfacht. Ein standardisiertes Kontrakt-Design, niedrige … Kreditderivat. Wir analysieren das Risiko von CDS, die im Handelsbuch gehalten werden. Wir vergleichen den Value at Risk (VaR) der … mit hohem Kreditrisiko deutlich geringer. Die Distanz sinkt auch bei längeren Haltedauern. Wir beobachten weiter eine …

Persistent link: https://www.econbiz.de/10012989272

The Valuation of Credit Default Swap with Counterparty Risk and Collateralization

Xiao, Tim - 2019

This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset pricing. In fact, correlated default risk is one of the most...

Persistent link: https://www.econbiz.de/10012864846

Economic Policy Uncertainty, CDS Spreads, and CDS Liquidity Provision

Wang, Xinjie - 2020

Using a news-based index of economic policy uncertainty (EPU), we find that EPU is positively associated with credit default swap (CDS) spreads and negatively associated with the number of liquidity providers in the CDS market. A 10% increase in EPU leads to an 8.4% increase in CDS spreads and a...

Persistent link: https://www.econbiz.de/10012853711

Credit Default Swaps in General Equilibrium : Endogenous Default and Credit Spread Spillovers

Darst, Matthew - 2018

This paper shows that credit default swaps (CDS) can affect the type of debt firms issue. Firms face a trade-off between investment scale and the cost of capital measured by the credit spread. Small-scale investment is safe, fully collateralized, but earns modest profits in all states....

Persistent link: https://www.econbiz.de/10012938470

Credit Default Swaps in General Equilibrium : Spillovers, Credit Spreads, and Endogenous Default

Darst, Matthew - 2016

This paper highlights two new effects of credit default swap markets (CDS) in a general equilibrium setting. First, when firms' cash flows are correlated, CDSs impact the cost of capital{credit spreads{and investment for all firms, even those that are not CDS reference entities. Second, when...

Persistent link: https://www.econbiz.de/10012992726

What Drives Systemic Credit Risk? Evidence from the US State CDS Market

Liu, Sheen - 2020

The root cause of systemic risk is an issue of on-going debate. We document evidence that common shocks of macroeconomic fundamentals are key driver of US state systemic credit risk. A structure model is developed to show importance of economic fundamentals. We find that macroeconomic variables...

Persistent link: https://www.econbiz.de/10012853974

Collateralized CDS and Default Dependence - Implications for the Central Clearing

Fujii, Masaaki - 2011

In this paper, we have studied the pricing of a continuously collateralized CDS. We have made use of the "survival measure" to derive the pricing formula in a straightforward way. As a result, we have found that there exists irremovable trace of the counter party as well as the investor in the...

Persistent link: https://www.econbiz.de/10013127295

Leveraged Buyout Bankruptcies, the Problem of Hindsight Bias, and the Credit Default Swap Solution

Simkovic, Michael - 2011

Persistent link: https://www.econbiz.de/10013133364

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