Dynamic Interactions Between Interest-Rate and Credit Risk: Theory and Evidence on the Credit Default Swap Term Structure*

2011 ◽  
Vol 17 (1) ◽  
pp. 403-441 ◽  
Author(s):  
Ren-Raw Chen ◽  
Xiaolin Cheng ◽  
Liuren Wu
Keyword(s):  
Interest Rate ◽  
Credit Risk ◽  
Term Structure ◽  
Credit Default Swap ◽  
Risk Theory ◽  
Dynamic Interactions ◽  
Credit Default ◽  
Default Swap

The signalling properties of the shape of the credit default swap term structure

2015 ◽  
Vol 17 (4) ◽  
pp. 71-99 ◽  
Author(s):  
Jenny Castellanos ◽  
Nick Constantinou ◽  
Wing Lon Ng
Keyword(s):  
Term Structure ◽  
Credit Default Swap ◽  
Credit Default ◽  
Default Swap

What Drives Systemic State Credit Risk? Evidence from the State Credit Default Swap (CDS) Market

2019 ◽  
Vol 28 (4) ◽  
pp. 5-45
Author(s):  
Sheen Liu ◽  
Chunchi Wu ◽  
Chung-Ying Yeh ◽  
Woongsun Yoo
Keyword(s):  
Credit Risk ◽  
Credit Default Swap ◽  
The State ◽  
Credit Default ◽  
Default Swap

The Rise of Credit Default Swaps and Its Implications on Financial Stability

2018 ◽  
pp. 336-350
Author(s):  
Fatma Sezer Dural
Keyword(s):  
Credit Risk ◽  
Exponential Growth ◽  
Financial Stability ◽  
Credit Default Swap ◽  
Credit Default Swaps ◽  
Financial Instruments ◽  
Credit Crisis ◽  
Credit Default ◽  
Default Swap ◽  
The Stability

The credit default swap market has experienced an exponential growth in recent decades. Though the fırst credit default swap contract was negotiated in the mid-1990s, the market has enjoyed a surge of popularity beginning in 2003. By the end of June 2013, the outstanding amount reached 24.3 trillion dollars. It is mostly used to transfer or to hedge credit risk. Concurrently with the global credit crisis, several shortcomings in CDS markets have appeared. One of the obvious questions is whether they affect the stability of financial markets. In this context after broader exhibition of credit default swaps market, speculative use of CDS, inception of central counterparty, and transparency of CDS market is handled. As a conclusion, it is true that the CDS market still has some weaknesses, but it is no more prone to be destabilizing than other financial instruments. This is shown in this chapter.

Counterparty credit risk and the credit default swap market

2012 ◽  
Vol 103 (2) ◽  
pp. 280-293 ◽  
Author(s):  
Navneet Arora ◽  
Priyank Gandhi ◽  
Francis A. Longstaff
Keyword(s):  
Credit Risk ◽  
Credit Default Swap ◽  
Credit Default ◽  
Counterparty Credit Risk ◽  
Default Swap

scholarly journals THE INTERACTIONS AND TRADE-OFFS OF SOVEREIGN CREDIT DEFAULT SWAP (CDS) AND BOND SPREADS IN A DYNAMIC CONTEXT

2019 ◽  
Vol 20 (3) ◽  
pp. 466-488
Author(s):  
Ioannis A. Tampakoudis ◽  
Andrius Tamošiūnas ◽  
Demetres N. Subeniotis ◽  
Ioannis G. Kroustalis
Keyword(s):  
Credit Risk ◽  
Price Discovery ◽  
Credit Default Swap ◽  
Bond Market ◽  
Discovery Process ◽  
Sovereign Credit ◽  
Credit Default ◽  
Default Swap ◽  
Bond Spreads ◽  
Price Discovery Process

This study provides a dynamic analysis of the lead-lag relationship between sovereign Credit Default Swap (CDS) and bond spreads of the highly indebted southern European countries, considering an extensive time sample from the period before the global financial crisis to the latest developments of the sovereign indebtedness in the euro area. We employ an integrated price discovery methodology on a rolling sample, with the intention to shed light on whether the CDS spreads can trigger rises in bond spreads, and the relative efficiency of credit risk pricing in the CDS and bond markets. In addition, we attempt to depict the evolution of the price discovery process regarding the direction of influence from one market to the other. The rolling window analysis verifies that the price discovery process evolves over time, presenting frequent alternations concerning the leading market. We find that during periods of economic turbulence the CDS market leads the bond market in price discovery, incorporating the new information about sovereign credit risk faster and more efficiently than the bond market does. This regularity should be seriously considered by private and public participants as they make investment and funding decisions. Therefore, the motivation of our paper is to identify the dominant market in terms of price discovery during a period of economic turmoil and, thus, to provide insights for decision making to investment bodies and central governments.

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