Relevant bibliographies by topics / CDS - Credit Default Swaps

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Academic literature on the topic 'CDS - Credit Default Swaps'

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Published: 22 February 2023

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Journal articles on the topic "CDS - Credit Default Swaps"

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Bomfim, Antulio N. "Credit Default Swaps." Finance and Economics Discussion Series 2022, no. 023 (May 6, 2022): 1–27. http://dx.doi.org/10.17016/feds.2022.023.

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Credit default swaps (CDS) are the most common type of credit derivative. This paper provides a brief history of the CDS market and discusses its main characteristics. After describing the basic mechanics of a CDS, I present a simple valuation framework that focuses on the relationship between conditions in the cash and CDS markets as well as an approach to mark to market existing CDS positions. The discussion highlights how the 2008 global financial crisis helped shape current practices and conventions in the CDS market, including the widespread adoption of standardized coupons and upfront premiums and the increased reliance on centralized counterparties. I also address CDS indexes--focusing on their growing role as key indicators of investors’ attitudes toward credit risk--and briefly examine their behavior during periods of acute financial or economic dislocations, including those associated with the COVID-19 pandemic.
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Schmaltz, Christian, and Periklis Thivaios. "Are Credit Default Swaps Credit Default Insurances?" Journal of Applied Business Research (JABR) 30, no. 6 (October 29, 2014): 1819. http://dx.doi.org/10.19030/jabr.v30i6.8900.

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No, they are not. Although they exhibit similar cash flow patterns (economic perspective) this article argues that from a legal, accounting and regulatory perspective credit default swaps (CDS) are not considered to be an insurance contract. The protection buyer of a CDS is eligible to obtain the compensation without suffering any loss (and potentially realizing a gain) whereas insurance policies only pay out to compensate a loss (and not potentially realizing a gain). This disconnect between protection and exposure is the source for potential over-coverage. Furthermore, the concentrated set of reference entities and (interbank) counterparties as well as their tradeability make CDSs highly systemically significant products. Our conclusion is that CDSs are not default insurance policies. We propose to use default protection instead of credit default insurance to avoid the mislabelling. Furthermore, CDS have a substantial systemic risk potential which sharply contrasts to the limited systemic risk in the insurance industry. The legal classification of CDS as insurance contracts would have an enormous impact on the liquidity of CDS, as the ability of counterparties to issue and participate in CDS contracts would be limited.
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Spuchlakova, Erika, and Maria Misankova. "Risk management of Credit Default Swap." New Trends and Issues Proceedings on Humanities and Social Sciences 3, no. 4 (March 22, 2017): 229–34. http://dx.doi.org/10.18844/prosoc.v3i4.1573.

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Credit derivatives are an up to date innovation in financial markets. These financial instrument have a potential to allow enterprises to trade and manage the credit risks and market risks. The striking growth of credit derivatives suggest that participant of financial markets find them to be useful instrument for risk management. The most popular and fundamental credit derivatives is a credit default swaps (CDS). In the paper we detailed the risk management of the credit default swaps and quantified the credit risk of investors in two way: (i) calculate the term structure of default probabilities from the market prices of traded CDS and (ii) calculate prices of CDS from the probability distribution of the time-to-default  Keywords: credit risk; credit default swap; risk management
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Kregzde, Arvydas, and Gediminas Murauskas. "ANALYSIS OF LITHUANIAN CREDIT DEFAULT SWAPS." Journal of Business Economics and Management 16, no. 5 (April 29, 2015): 916–30. http://dx.doi.org/10.3846/16111699.2014.890130.

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This paper studies international sovereign Credit Default Swaps (CDS) market focusing attention to the CDS of Central and East Europe. The main purpose of the study was to perform detail analysis of Lithuanian CDS in the global capital market. We compared the CDS markets of other countries and found some commonalities between them. We study the credit curve produced by CDS and volatility of CDS. A great attention is paid to investigate the relationship of CDS and the government bond market. Analysis of finding a leading role of CDS and the bond markets in the price discovering process is made. A leading market for different periods is found by using the Vector Error Correction model. Our main finding is that during the volatile period price discovery takes place in the bond market and in the calm period price discovery is observed in the CDS market. Disclosed relationship between CDS spreads and Eurobonds yield risk premium gives an additional decision making tool for sovereign debt managers.
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BRIGO, DAMIANO, and KYRIAKOS CHOURDAKIS. "COUNTERPARTY RISK FOR CREDIT DEFAULT SWAPS: IMPACT OF SPREAD VOLATILITY AND DEFAULT CORRELATION." International Journal of Theoretical and Applied Finance 12, no. 07 (November 2009): 1007–26. http://dx.doi.org/10.1142/s0219024909005567.

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We consider counterparty risk for Credit Default Swaps (CDS) in presence of correlation between default of the counterparty and default of the CDS reference credit. Our approach is innovative in that, besides default correlation, which was taken into account in earlier approaches, we also model credit spread volatility. Stochastic intensity models are adopted for the default events, and defaults are connected through a copula function. We find that both default correlation and credit spread volatility have a relevant impact on the positive counterparty-risk credit valuation adjustment to be subtracted from the counterparty-risk free price. We analyze the pattern of such impacts as correlation and volatility change through some fundamental numerical examples, analyzing wrong-way risk in particular. Given the theoretical equivalence of the credit valuation adjustment with a contingent CDS, we are also proposing a methodology for valuation of contingent CDS on CDS.
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Narayanan, Rajesh, and Cihan Uzmanoglu. "Credit Default Swaps and Firm Value." Journal of Financial and Quantitative Analysis 53, no. 3 (April 2, 2018): 1227–59. http://dx.doi.org/10.1017/s0022109017001235.

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This article provides evidence that firm value declines when credit default swaps (CDSs) are initiated and that the effect is greater when CDS trading activity is higher. This decline, which arises from an increase in the cost of capital as opposed to a decrease in free cash flows, traces to a deterioration in the firm’s credit quality and stock liquidity. Firm value declines less when CDS trading is likely to produce incremental information, suggesting that CDS trading has informational benefits for firm value. However, the evidence does not indicate that firm value increases because CDS availability facilitates investments.
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BRIGO, DAMIANO, NICOLA PEDE, and ANDREA PETRELLI. "MULTI-CURRENCY CREDIT DEFAULT SWAPS." International Journal of Theoretical and Applied Finance 22, no. 04 (June 2019): 1950018. http://dx.doi.org/10.1142/s0219024919500183.

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Credit default swaps (CDS) on a reference entity may be traded in multiple currencies, in that, protection upon default may be offered either in the currency where the entity resides, or in a more liquid and global foreign currency. In this situation, currency fluctuations clearly introduce a source of risk on CDS spreads. For emerging markets, but in some cases even in well-developed markets, the risk of dramatic foreign exchange (FX)-rate devaluation in conjunction with default events is relevant. We address this issue by proposing and implementing a model that considers the risk of foreign currency devaluation that is synchronous with default of the reference entity. As a fundamental case, we consider the sovereign CDSs on Italy, quoted both in EUR and USD. Preliminary results indicate that perceived risks of devaluation can induce a significant basis across domestic and foreign CDS quotes. For the Republic of Italy, a USD CDS spread quote of 440 bps can translate into an EUR quote of 350[Formula: see text]bps in the middle of the Euro-debt crisis in the first week of May 2012. More recently, from June 2013, the basis spreads between the EUR quotes and the USD quotes are in the range around 40[Formula: see text]bps. We explain in detail the sources for such discrepancies. Our modeling approach is based on the reduced form framework for credit risk, where the default time is modeled in a Cox process setting with explicit diffusion dynamics for default intensity/hazard rate and exponential jump to default. For the FX part, we include an explicit default-driven jump in the FX dynamics. As our results show, such a mechanism provides a further and more effective way to model credit/FX dependency than the instantaneous correlation that can be imposed among the driving Brownian motions of default intensity and FX rates, as it is not possible to explain the observed basis spreads during the Euro-debt crisis by using the latter mechanism alone.
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Hastuti, Dwi, Muhammad Edhie Purnawan, and Sunargo Sunargo. "Pengaruh variabel-variabel di sektor riil dan perbankan terhadap Shock Credit Default Swap (CDS) di Indonesia." e-Journal Perdagangan Industri dan Moneter 7, no. 3 (December 26, 2019): 185–204. http://dx.doi.org/10.22437/pim.v7i3.13071.

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The rapid development of the global financial market today is getting faster and integrated with the existence of advanced technology. Along with economic issues in various worlds, directly related to the global economic crisis that occurred in 2008-2009 greatly influenced the development of credit default swaps (CDS) in developing countries such as Indonesia. The increase in the value of the credit default swap, which carries a high risk of default, will further impact investor confidence and weaken the exchange rate. This is reflected in the shocks of the global crisis and the subprime mortgage prime in the United States. However, the onset of a global crisis can be early with early indicators of crisis from credit default swaps so that crisis management can be carried out faster. The results of this study indicate that the credit default swap is responded to faster by the banking sector than the real sector. Keywords: Financial crises, Credit Default Swap (CDS), Riil and banking sector
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Brigida, Matt. "CREDIT DEFAULT SWAPS AND BANK SAFETY." Applied Finance Letters 11 (October 3, 2022): 19–27. http://dx.doi.org/10.24135/afl.v11i.594.

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In this analysis we find evidence that credit default swap (CDS) purchasesincrease bank safety. Specifically, we show banks which were net buyers ofCDS had smaller increases in loan loss reserves in response to the COVID-19crisis. Previous research had speculated that bank CDS purchases causedincreased risk-taking by banks which offset the effect of the hedge. This anal-ysis contributes to this literature on the effect of hedging on bank risk takingand capital structure. Moreover, since our results are consistent with CDSbeing effectively used to hedge, our results have implications for systemicrisk.
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Kregzde, Arvydas, and Gediminas Murauskas. "Analysing Sovereign Credit Default Swaps of Baltic Countries." Verslas: Teorija ir Praktika 16, no. 2 (June 30, 2015): 121–31. http://dx.doi.org/10.3846/btp.2015.551.

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The paper analyses development of the Baltic sovereign CDS market. The level of commonalities and differences in credit risk of the Baltic countries with regard to CDS spreads is investigated. We apply principal component analysis, regression analysis, correlation analysis methods and Granger causality test. Driving forces for changes of CDS spreads in the individual country are established. We discover that the main impact of CDS spread changes arrives from external sources. Our study reveals interdependence between CDS spreads of the Baltic countries and analyses a contagion effect of the change of CDS spreads.
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Dissertations / Theses on the topic "CDS - Credit Default Swaps"

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Shan, Chenyu, and 陜晨煜. "Credit default swaps (CDS) and loan financing." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 2013. http://hub.hku.hk/bib/B5089965X.

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As evidenced by its market size, credit default swaps (CDSs) has been the cornerstone product of the credit derivatives market. The central question that I attempt to answer in this thesis is: why and how does the introduction of CDS market affect bank loan financing? Theoretical works predict some potential effects from CDS market, but empirical evidence is still rare. This dissertation empirically examines the effects of CDS trading on bank loan financing. In chapter one, I find that banks increase average loan amount and charge higher loan spread after the onset of CDS trading on the borrower’s debt. Also, credit quality of the borrower deteriorates for those with active CDS trading. These findings suggest that banks tend to take on more credit risk by issuing larger loans and by lending to riskier firms that could not obtain bank loan in the absence of CDS. The risk-taking by banks ultimately transmitted to higher bank-level risk profile. The second chapter is the first empirical study of CDS’ role in determining loan syndicate structure. I find larger lead bank share when CDS is in place. Moreover, participation of credit derivatives trading by lead banks is much larger than by the participants, suggesting that lead banks have better chance to use CDS to their own advantage. Further analysis shows that lead banks retain an even larger share when it is more experienced dealing with the borrower and when information asymmetry between the lender and the borrower is less severe. Different from conventional wisdom about moral hazard in syndicated lending, our findings suggest that the lead bank likely takes on more credit risk voluntarily due to its increased financing capacity. The third chapter focuses on the effects of CDS on debt contracting. Given that current evidence does not show CDS reduces average cost of debt, we conjecture that the diversification benefit is reflected by relaxation of restrictions imposed on borrowers. Consistent with our hypothesis, we find the marginal effect from CDS trading on covenant strictness measure is 16.8% on average. One standard deviation increase in the number of outstanding CDS contracts loosens net worth covenants by approximately 8.9%. Using various endogeneity controls, we are able to show the loosening of covenants is due to the reduced level of debtholder-shareholder conflict. Furthermore, the loosening effect is stronger when the expected renegotiation cost is larger, consistent with the view that CDS mitigates contracting friction and improves contracting efficiency. Overall, this dissertation attempts to provide first empirical evidence on how CDS affects bank loan financing. We focus the analysis on loan issuance, syndicate structure and contracting. The findings suggest that banks lend to riskier borrowers in the presence of CDS. On a positive note, banks tend to impose less restrictive covenants on its borrower, which may mitigate frictions in lending market in terms of ex ante bargaining and ex post renegotiation cost.
published_or_final_version
Economics and Finance
Doctoral
Doctor of Philosophy
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Silva, Paulo Miguel Pereira da. "Essays on the informational efficiency of credit default swaps." Doctoral thesis, Universidade de Évora, 2017. http://hdl.handle.net/10174/21092.

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This thesis contributes to the strand of the financial literature on credit derivatives, in particular the credit default swaps (CDS) market. We present four inter-connected studies addressing CDS market efficiency, price discovery, informed trading and the systemic nature of the CDS market. The first study explores a specific channel through which informed traders express their views on the CDS market: mergers and acquisitions (M&A) and divestitures activities. We show that information obtained by major banks while providing these investment services is impounded by CDS rates prior to the operation announcement. The run-up to M&A announcements is characterized by greater predictability of stock returns using past CDS spread data. The second study evaluates the incremental information value of CDS open interest relative to CDS spreads using a large panel database of obligors. We find that open interest helps predict CDS rate changes and stock returns. Positive open interest growth precedes the announcement of negative earnings surprises, consistent with the notion that its predictive ability is linked to the disclosure of material information. The third study measures the impact on CDS market quality of the ban on uncovered sovereign CDS buying imposed by the European Union. Using panel data models and a difference-in-differences analysis, we find that the ban helped stabilize CDS market volatility, but was in general detrimental to overall market quality. Lastly, we investigate the determinants of open interest dynamics to uncover the channels through which CDS may endanger the financial system. Although we find information asymmetry and divergence of opinions on firms’ future performance as relevant drivers of open interest, our results indicate that systematic factors play a much greater influence. The growth of open interest for different obligors co-varies in time and is pro-cyclical. Funding costs and counterparty risk also reduce dealers’ willingness to incur inventory risk; Eficiência dos mercados de Credit Default Swaps Resumo: Esta tese investiga o mercado de derivados de crédito, e em particular o mercado de credit default swaps (CDS). São apresentados quatro estudos interligados abordando temáticas relacionadas com a eficiência informacional, a existência de negociação informada no mercado de CDS, e a natureza sistémica daquele mercado. O primeiro estudo analisa a existência de negociação informada no mercado de CDS antes de operações de aquisição, fusões ou venda de ativos relevantes. A nossa análise mostra uma reação dos prémios de CDS antes do anúncio daqueles eventos, sendo em alguns casos mais imediata do que a reação dos mercados acionistas. O segundo estudo avalia o conteúdo informativo das posições em aberto no mercado de CDS utilizando dados em painel de diferentes empresas ao longo do tempo. Os resultados indiciam que as posições em aberto podem ajudar a prever variações futuras dos prémios de CDS e retornos acionistas. Em acréscimo, verifica-se um aumento estatisticamente significativo das posições em aberto antes da divulgação de surpresas negativas nos resultados das empresas. O terceiro estudo mede os efeitos da proibição de posições longas em CDS sobre entidades soberanas pertencentes ao Espaço Único Europeu sem a detenção do ativo subjacente pelo comprador. A análise mostra um efeito negativo da proibição sobre a qualidade do mercado, pese embora se tenha assistido em simultâneo à redução da volatilidade. Por fim, são analisados os determinantes dos montantes associados a posições em aberto, com o intuito de compreender como o mercado de CDS pode influenciar o risco sistémico. Os resultados indicam que a assimetria de informação e a divergência de opiniões dos investidores influenciam aqueles montantes. Todavia, fatores sistemáticos como risco de contraparte, aversão ao risco e risco de re-financiamento parecem ser ainda mais relevantes por via do efeito que exercem no risco do balanço dos intermediários financeiros.
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Lin, Ming-Tsung. "Three studies in hedge funds and credit default swaps." Thesis, University of Manchester, 2015. https://www.research.manchester.ac.uk/portal/en/theses/three-studies-in-hedge-funds-and-credit-default-swaps(b85f19e8-7fb5-4256-b4c6-276af18264a3).html.

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This thesis consists of one hedge fund study and two credit default swap (CDS) studies. The first study investigates the relationship between mega hedge funds (the largest 25% of funds) and two bond yields (U.S. Treasury yield and Baa yield). Using a merged sample of 9,725 hedge funds from 1994 to 2012, I find that hedge fund outflow produced a more significant relationship than inflow, and the dollar outflow of large hedge funds can predict the increase in the bond yields. The association is also more pronounced for large funds with a short notice period prior to redemption. The results suggest that hedge fund flows provide predictive information for the movement of bond yields. The second study investigates the systematic and firm-specific credit and liquidity risks of CDS spreads. Using data on CDS spreads of 356 U.S. firms from 2002 to 2011, I find that systematic credit and liquidity risks are important in cross-sectional prediction of CDS spreads. In addition, the importance of systematic liquidity risk becomes substantial since the financial crisis in 2007. This finding challenges the current Basel III procedures for counterparty credit risk regulations, in which only pure default should be used. In addition, the systematic credit and liquidity factors can be used as a proxy for CDS spreads of firms that do not have traded CDSs. The last study extends Carr and Wu (2010), in which deep out-of-the-money (DOOM) put options and CDSs are associated as they both provide credit insurance for credit protection buyers. Using the Nelson-Siegel (1987) model, I obtain the credit and illiquidity components for DOOMs and CDSs over the period from May 2002 to May 2012. I show that, after controlling the factors that explain the difference between the DOOM and CDS markets, the components converge over time in these two markets. Thus, I can exploit the observed convergence pattern by constructing a simple trading strategy, and this benchmark strategy produces a positive return. I further construct two other strategies based on the component information, and these two refined strategies outperform the benchmark strategy by the Sharpe ratio and Carhart alpha. My three studies contribute to the literature in hedge fund systemic risk and CDS credit and liquidity risks.
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Bravo, Beneitez Rodrigo. "'Naked’ CDS Regulation and its Impact On Price Discovery in the Credit Markets." Scholarship @ Claremont, 2013. http://scholarship.claremont.edu/cmc_theses/636.

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This paper seeks to fill a gap in the literature regarding the consequences of banning ‘naked’ Credit Default Swaps (CDS). In particular, I use the European Union’s Ban on ‘naked” Sovereign CDS as an event study to evaluate the impact that banning such derivative products has on the price discovery process in the credit markets. Using both Granger Causality tests and a Vector Error Correction Model, I find that before November 1, 2012, CDS are the clear price leader in the credit markets. However, since the official date the regulation was put into effect, CDS’ price leadership was eroded. Moreover, after the ban, CDS and Bond Yield Spreads are no longer cointegrated in the long run, suggesting that different pricing mechanisms now exist between the two securities
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Loshkina, Anna, and Elena Malysheva. "Modeling and monitoring of the price process of Credit Default Swaps." Thesis, Halmstad University, School of Information Science, Computer and Electrical Engineering (IDE), 2008. http://urn.kb.se/resolve?urn=urn:nbn:se:hh:diva-2208.

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Credit derivatives are very popular on financial markets in recent days.

The most liquid credit derivative is a credit default swap (CDS). In

this research we investigate methods for modeling and monitoring of the

price process of CDS. We study Hull and White model to calculate CDS

spread and have data for our analysis. We consider different methods for

monitoring of the price process of CDS. In particular we study CUSUM

method. And we calculate more commonly used perfomance measures

for this method.

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Neves, Ricardo Filipe Godinho Miranda das. "Clearing Credit Default Swaps : an new look into the basis." Master's thesis, Instituto Superior de Economia e Gestão, 2014. http://hdl.handle.net/10400.5/7864.

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Mestrado em Contabilidade, Fiscalidade e Finanças Empresariais
Este estudo pretende analisar se períodos de turbulência nos mercados financeiros causaram uma quebra de estrutura na relação entre os spreads dos CDS e das Obrigações (Base). Obtivémos evidência que um largo número de quebras de estrutura foi detectado para as empresas incluídas na amostra durante o período da crise da dívida soberana Europeia. Para além disso, o efeito do risco de contra parte na base revelou ter também um maior impacto nas empresas do sector financeiro no período após a quebra de estrutura detectada.
This study aims to analyse whether periods of financial turmoil caused the relation between CDS and corporate bond spreads (CDS-Bond basis) to structurally break. We obtained evidence that a higher number of breaks were detected during the European sovereign debt crisis for the firms included in the sample. Besides, firm specific counterparty risk effect on the basis revealed also to have stronger impact on financial firms in the after-break period.
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Johansson, Martin, and Johanna Nederberg. "Earnings Announcements In The Credit Default Swap Market - An Event Study." Thesis, Uppsala universitet, Företagsekonomiska institutionen, 2014. http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-226706.

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This paper investigates the European CDS markets response to earnings announcements between the years 2011-2013. Through the use of event study methodology, we investigate if the CDS market reacts to earnings news in terms of abnormal spread changes. Furthermore, by exploring the pre- and post announcement window the study examines the efficiency of the CDS market. The results imply that earnings announcements provide valuable information to the CDS market, with statistically significant results on the 5 % and 10 % significant level for negative and positive news respectively. Additionally, the paper shows that the market has a rather symmetric reaction to negative and positive earnings news since there is no significant difference in effects. The paper further reveals that there is no significant difference in the response between different credit rating groups. In terms of market efficiency, the study cannot confirm that there is anticipation for earnings announcements. The study further shows that there is no post-earnings announcement drift in the CDS market and that the market, overall, is efficient in incorporating the information into the spreads. Finally, a cross-sectional regression analysis confirms that negative earnings surprises are linked to large announcement day reactions, while positive earnings surprises are not.
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Britse, Oscar, and Johan Jarnmo. "Greenhouse Gas Footprint Minimization of Credit Default Swap Baskets." Thesis, Umeå universitet, Institutionen för matematik och matematisk statistik, 2018. http://urn.kb.se/resolve?urn=urn:nbn:se:umu:diva-149230.

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Global bond market capitalization amounts to approximately $100 trillion, compared to $60 trillion in the equity markets. Despite debt financing being a large part of the global financial market, the measurements and greenhouse gas reduction investment strategies to date are not nearly as thorough as for equity financing. More recently, the problem has been brought into light by the World Bank, expressing concerns about the crucial role of debt financing activities in the current and upcoming threats caused by climate change. A commonly used credit derivative in debt financing is credit default swaps (CDS), which is an agreement between two parties to exchange the credit risk of a reference entity. The buyer of the contract makes fixed periodic payments to the seller of the contract, who collects the premiums in exchange for making the protection buyer whole in the case of a defaulting reference entity. This thesis aims to minimize the greenhouse gas emission exposure for two CDS indices, iTraxx Main and CDX.IG, each consisting of 125 equally weighted constituents, or companies. The CDS indices are widely used high liquid fixed income instruments. In 2017, iTraxx Main had a monthly trading volume of $330-440 billion notional, and CDX.IG a corresponding volume of $200-275 billion. In order to rate the greenhouse gas emissions of the constituents, the ECOBAR model was used. The model utilizes a discrete ranking score system, where the aim is to obtain as low score as possible. To minimize the ECOBAR score for the baskets, Markowitz Modern Portfolio Theory was used, implemented by using a quadratic programming algorithm. By optimizing the portfolios while retaining a low tracking error and high correlation toward the CDS indices, underlying investment properties were retained. We show that one can construct replicated portfolios of the CDS indices that have significantly lower ECOBAR scores than the indices themselves, whilst still maintaining a low tracking error and high correlation with the actual indices. When constructing baskets of fewer constituents, one can replicate the indices with merely 10-30 constituents, without worsening the tracking error or correlation substantially, and obtain an even lower ECOBAR score for the respective portfolios.
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Benbouzid, Nadia. "Credit risk in the banking sector : international evidence on CDS spread determinants before and during the recent crisis." Thesis, Queen Mary, University of London, 2015. http://qmro.qmul.ac.uk/xmlui/handle/123456789/8912.

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Credit Default Swaps (CDS) instruments - as an indicator of credit risk - were one of the most prominent innovations in financial engineering. Very limited literature existed on the drivers of CDS spreads before the financial crisis due to the opacity of this market and its lack of transparency. First, this thesis investigates the drivers of CDS spread in the UK banking sector, by considering the role of the housing market, over the period of 2004-2011. I find that, in the long-run, house price dynamics were the main factor contributing to wider CDS spreads. In addition, I show that a rise in stock prices lead to higher availability of capital and therefore increased bank borrowing activities, which led to lower credit risk. Furthermore, findings show that with higher aggregate bank liquidity, banks tend to grant more loans to low-income consumers, thus increasing bank credit risk. In addition, in the short-run, I employ the Structural VAR by imposing short-run restrictions to identify the five shocks arising from the CDS spread, the house price index, the yield spread, the TED spread, and the FTSE100. The SVAR findings indicate that a positive shock to house prices significantly increases the CDS spread in the medium-term, in the UK banking sector. In addition, apart from its own shock, the house price shock explains a big part of the variance (nearly 20%) in CDS spread. These results remained robust even after changing the ordering of the variables in the Structural VAR. Second, considering the bank-level factors across 30 countries and 115 banks, I find most significant bank-level drivers of the CDS spread were asset quality, liquidity and the operations income ratio. As such, banks with better asset quality, high levels of liquidity and operations income ratio were subject to lower CDS spreads and credit risk. Furthermore, larger banks were found to be more risky than smaller banks. We have conducted the U-test and our results indicate the presence of a U-shape relationship between bank size and bank CDS spread. It should be noted that in order to ensure that our results are robust, we used several estimation frameworks, including the FE, RE and alternative Generalized Method of Moments (GMM) approaches, which all prove the existence of a U-shape relationship between the CDS spread and bank size. In addition, we find a threshold level of bank size, which shows that banks growing beyond this point are subject to wider CDS spreads. Finally, I consider the difference in financial systems at country-level and regulatory structures at bank-level, in a panel setting, over the period of 2004-2011. At country-level, my findings directly link financial deepening to higher credit risk, reflecting a sign of credit bubble. Besides, at bank-level, I confirm my previous findings whereby asset quality, liquidity and operations income remain significant drivers of the CDS spread.
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El, cheikh Samah. "Le rôle des Credit Default Swaps dans les crises de la dette souveraine. Une application au cas de la zone euro." Thesis, Université Côte d'Azur (ComUE), 2019. http://www.theses.fr/2019AZUR0006/document.

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Cette thèse porte sur l'étude des facteurs sous-jacents au risque du défaut souverain, tel que mesuré par les spreads des CDS souverains, au cours de la crise de la dette souveraine en Europe. En analysant les données mensuelles de janvier 2007 à septembre 2015 en utilisant un modèle à correction d'erreur (VECM), nous constatons que le risque de défaut souverain européen répond en partie à un environnement macroéconomique caractérisé par de mauvaises politiques budgétaires et une détérioration des facteurs économiques. Plus précisément, la hausse du taux de chômage, le niveau d'endettement et la réduction des soldes de la balance courante ont accru les spreads des CDS souverains. Ces résultats ne permettent pas de rejeter l’hypothèse selon laquelle le défaut souverain a été motivé par des fondamentaux économiques faibles. Mais l'importance relative de ces facteurs change avec le temps et le groupe de pays. La présence et l'absence de la Grèce ont joué un rôle clé dans l'évolution des spreads dans les pays de la zone euro. La dégradation des notations en Grèce et l'aversion accrue pour le risque de la part des Européens ont contribué à une augmentation significative des spreads de CDS des pays de la zone euro et des autres pays. Notre analyse VECM met en évidence des retombées directes de la Grèce vers la périphérie de la zone euro via des canaux non fondamentaux. Enfin, nos résultats suggèrent que l’émergence de la crise de la dette a été causée par des fondamentaux faibles, mais a également un caractère auto-réalisateur
This thesis attempts to identify the factors behind the sovereign default risk, as measured by sovereign CDS spreads, during the sovereign debt crisis in Europe. By analyzing monthly data from January 2007 to September 2015 using vector error correction model with panel data, we find that European sovereign default risk is partly a response to a macroeconomic environment characterized by poor fiscal policies and deteriorating economic factors. Specifically, higher unemployment rate, debt levels and lower current account balances have increased the sovereign CDS spreads. These results do not allow us to reject the hypothesis that the sovereign default was driven by weak economic fundamentals. But the relative importance of these factors changes over time and group of countries. The presence and absence of Greece have played a key role in the developments of the spreads in the euro area countries. The rating downgrades in Greece and the higher European risk aversion had contributed to a significant rise in the CDS spreads of euro and non-euro area countries. Our VECM analysis does suggest direct spillovers from Greece to Euro area periphery via non-fundamental channels. Finally, our results suggest that the emergence of the debt crisis was caused by weak fundamentals but has also a self-fulfilling character
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Books on the topic "CDS - Credit Default Swaps"

1

CDS delivery option: Better pricing of credit default swaps. New York: Bloomberg Press, 2009.

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Culp, Christopher L., Andria van der Merwe, and Bettina J. Stärkle. Credit Default Swaps. Cham: Springer International Publishing, 2018. http://dx.doi.org/10.1007/978-3-319-93076-3.

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Wagner, Eva. Credit default swaps und Informationsgehalt. Wiesbaden: Gabler, 2007.

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Andritzky, Jochen R. The pricing of credit default swaps during distress. [Washington, D.C.]: International Monetary Fund, Monetary and Capital Markets Dept., 2006.

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Bolton, Patrick. Credit default swaps and the empty creditor problem. Cambridge, MA: National Bureau of Economic Research, 2010.

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Singh, Manmohan. Are credit default swap spreads high in emerging markets?: An alternative methodology for proxying recovery value. Washington, D.C: International Monetary Fund, International Capital Markets Dept., 2003.

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Chan-Lau, Jorge A. Equity prices, credit default swaps, and bond spreads in emerging markets. [Washington, D.C.]: International Monetary Fund, 2004.

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Chan-Lau, Jorge A. Anticipating credit events using credit default swaps, with an application to sovereign debt crises. [Washington, D.C.]: International Monetary Fund, International Capital Markets Department, 2003.

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Blanco, Roberto. An empirical analysis of the dynamic relationship between investment-grade bonds and credit default swaps. London: Bank of England, 2004.

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Zhu, Haibin. An empirical comparison of credit spreads between the bond market and the credit default swap market. Basel, Switzerland: Bank for International Settlements, 2004.

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Book chapters on the topic "CDS - Credit Default Swaps"

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Nwogugu, Michael I. C. "A Critique of Credit Default Swaps (CDS) Indices." In Indices, Index Funds And ETFs, 111–37. London: Palgrave Macmillan UK, 2018. http://dx.doi.org/10.1057/978-1-137-44701-2_3.

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Tamakoshi, Go, and Shigeyuki Hamori. "Relationship between sovereign CDS and banking sector CDS." In Credit Default Swap Markets in the Global Economy, 17–26. Abingdon, Oxon ; New York, NY : Routledge, 2018. | Series: Routledge studies in the modern world economy ; 173: Routledge, 2018. http://dx.doi.org/10.4324/9781315276663-2.

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Tamakoshi, Go, and Shigeyuki Hamori. "Interdependence between corporate CDS indices." In Credit Default Swap Markets in the Global Economy, 145–59. Abingdon, Oxon ; New York, NY : Routledge, 2018. | Series: Routledge studies in the modern world economy ; 173: Routledge, 2018. http://dx.doi.org/10.4324/9781315276663-11.

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Tamakoshi, Go, and Shigeyuki Hamori. "Dependence structures among corporate CDS indices." In Credit Default Swap Markets in the Global Economy, 131–44. Abingdon, Oxon ; New York, NY : Routledge, 2018. | Series: Routledge studies in the modern world economy ; 173: Routledge, 2018. http://dx.doi.org/10.4324/9781315276663-10.

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Tamakoshi, Go, and Shigeyuki Hamori. "Key determinants of sovereign CDS spreads." In Credit Default Swap Markets in the Global Economy, 27–38. Abingdon, Oxon ; New York, NY : Routledge, 2018. | Series: Routledge studies in the modern world economy ; 173: Routledge, 2018. http://dx.doi.org/10.4324/9781315276663-3.

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Tamakoshi, Go, and Shigeyuki Hamori. "Dynamic spillover among sovereign CDS spreads." In Credit Default Swap Markets in the Global Economy, 39–55. Abingdon, Oxon ; New York, NY : Routledge, 2018. | Series: Routledge studies in the modern world economy ; 173: Routledge, 2018. http://dx.doi.org/10.4324/9781315276663-4.

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Tamakoshi, Go, and Shigeyuki Hamori. "Causality among financial sector CDS indices." In Credit Default Swap Markets in the Global Economy, 59–71. Abingdon, Oxon ; New York, NY : Routledge, 2018. | Series: Routledge studies in the modern world economy ; 173: Routledge, 2018. http://dx.doi.org/10.4324/9781315276663-5.

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Tamakoshi, Go, and Shigeyuki Hamori. "Dynamic correlation among banks’ CDS spreads." In Credit Default Swap Markets in the Global Economy, 119–30. Abingdon, Oxon ; New York, NY : Routledge, 2018. | Series: Routledge studies in the modern world economy ; 173: Routledge, 2018. http://dx.doi.org/10.4324/9781315276663-9.

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Tamakoshi, Go, and Shigeyuki Hamori. "Dependence structure of insurance sector CDS indices." In Credit Default Swap Markets in the Global Economy, 88–103. Abingdon, Oxon ; New York, NY : Routledge, 2018. | Series: Routledge studies in the modern world economy ; 173: Routledge, 2018. http://dx.doi.org/10.4324/9781315276663-7.

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Tamakoshi, Go, and Shigeyuki Hamori. "Time-varying correlation among bank sector CDS indices." In Credit Default Swap Markets in the Global Economy, 104–16. Abingdon, Oxon ; New York, NY : Routledge, 2018. | Series: Routledge studies in the modern world economy ; 173: Routledge, 2018. http://dx.doi.org/10.4324/9781315276663-8.

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Conference papers on the topic "CDS - Credit Default Swaps"

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Atrissi, Nizar, and Maya Akoum. "CREDIT DEFAULT SWAPS AND THE ARAB UPRISING." In Annual International Conferences on Accounting and Finance. Global Science & Technology Forum (GSTF), 2012. http://dx.doi.org/10.5176/2251-1997_af98.

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"Valuing credit default swaps in uncertain environments." In 2018 4th International Conference on Innovative Development of E-commerce and Logistics. Clausius Scientific Press, 2018. http://dx.doi.org/10.23977/icidel.2018.089.

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Ma, Tianyun. "Pricing Credit Default Swaps Under Fractal Structural Model." In 2009 International Conference on Management of e-Commerce and e-Government. IEEE, 2009. http://dx.doi.org/10.1109/icmecg.2009.23.

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Maeno, Yoshiharu, Satoshi Morinaga, Kenji Nishiguchi, and Hirokazu Matsushima. "Impact of credit default swaps on financial contagion." In 2014 IEEE Conference on Computational Intelligence for Financial Engineering & Economics (CIFEr). IEEE, 2014. http://dx.doi.org/10.1109/cifer.2014.6924067.

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Alexopoulos, Georgios. "THE ECB’S FINANCIAL STABILITY IMPACT ON CREDIT DEFAULT SWAPS MARKET." In 16th Economics & Finance Conference, Prague. International Institute of Social and Economic Sciences, 2022. http://dx.doi.org/10.20472/efc.2022.016.001.

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Xu, Ruxing, and Shenghong Li. "A Tree Model for Pricing Credit Default Swaps with Equity, Market and Default Risk." In 2009 International Conference on Management and Service Science (MASS). IEEE, 2009. http://dx.doi.org/10.1109/icmss.2009.5301932.

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Schuldenzucker, Steffen, Sven Seuken, and Stefano Battiston. "Clearing Payments in Financial Networks with Credit Default Swaps [Extended Abstract]." In EC '16: ACM Conference on Economics and Computation. New York, NY, USA: ACM, 2016. http://dx.doi.org/10.1145/2940716.2940791.

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Yu, Yue. "The Application of Machine Learning Algorithms in Credit Card Default Prediction." In 2020 International Conference on Computing and Data Science (CDS). IEEE, 2020. http://dx.doi.org/10.1109/cds49703.2020.00050.

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Shear, Falik, Hilal Anwar Butt, and Imtiaz Badshah. "AN ANALYSIS OF THE RELATIONSHIP BETWEEN THE SOVEREIGN CREDIT DEFAULT SWAPS AND THE STOCK MARKET OF PAKISTAN THROUGH HANDLING OUTLIERS." In 8th Economics & Finance Conference, London. International Institute of Social and Economic Sciences, 2017. http://dx.doi.org/10.20472/efc.2017.008.010.

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Reports on the topic "CDS - Credit Default Swaps"

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Gamboa-Estrada, Fredy, and Jose Vicente Romero. Modelling CDS Volatility at Different Tenures: An Application for Latin-American Countries. Banco de la República de Colombia, May 2022. http://dx.doi.org/10.32468/be.1199.

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Assessing the dynamics of risk premium measures and its relationship with macroeconomic fundamentals is important for both macroeconomic policymakers and market practitioners. This paper analyzes the main determinants of CDS in Latin-America at different tenures, focusing on their volatility. Using a component GARCH model, we decompose volatility between permanent and transitory components. We find that the permanent component of CDS volatility in all tenors was higher and more persistent in the global financial crisis than during the recent COVID-19 shock. JEL Classification: C22, C58, G01, G15. Keywords: Credit default swaps (CDS), CDS in Latin-American countries, sovereign risk, volatility, crisis, component GARCH models
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Gomez-Gonzalez, Jose E., Jorge M. Uribe, and Oscar M. Valencia. Risk Spillovers between Global Corporations and Latin American Sovereigns: Global Factors Matter. Inter-American Development Bank, May 2022. http://dx.doi.org/10.18235/0004266.

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This paper studies volatility spillovers in credit default swaps (CDS) between the corporate sectors and Latin American countries. Daily data from October 14, 2006, to August 23, 2021, are employed. Spillovers are computed both for the raw data and for filtered series which factor out the effect of global common factors on the various CDS series. Results indicate that most spillovers occur within groups that is, within the series of sovereign CDS contracts and the price contracts of CDS issued by global corporations. However, considerable spillovers are also registered between LAC sovereigns and corporations. Interesting differences are encountered between filtered and unfiltered data. Specifically, spillovers from countries to corporations are overestimated (by about 4.3 percentage points) and spillovers from corporations to sovereigns are underestimated (by about 5.8 percentage points) when unfiltered data are used. This result calls for a revision of results obtained from studies that do not consider the role played by global common factors in system spillovers. Like in most related studies, spillovers show considerable time variation, being larger during times of financial or economic distress. When looking at total system spillovers over time, those corresponding to unfiltered series are always larger than those corresponding to filtered series. The difference between the two time series is largest in times of distress, indicating that global factors play a major role in times of crisis. Similar conclusions are derived from network analysis.
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Stulz, René. Credit Default Swaps and the Credit Crisis. Cambridge, MA: National Bureau of Economic Research, September 2009. http://dx.doi.org/10.3386/w15384.

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Lee, Jongsub, Junho Oh, and David Yermack. Credit Default Swaps, Agency Problems, and Management Incentives. Cambridge, MA: National Bureau of Economic Research, November 2017. http://dx.doi.org/10.3386/w24064.

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Bolton, Patrick, and Martin Oehmke. Credit Default Swaps and the Empty Creditor Problem. Cambridge, MA: National Bureau of Economic Research, May 2010. http://dx.doi.org/10.3386/w15999.

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