Credit Risk Premia in Sovereign Credit Default Swaps

2018 ◽  
Author(s):  
Rob C. Sperna Weiland
Keyword(s):  
Credit Risk ◽  
Credit Default Swaps ◽  
Risk Premia ◽  
Sovereign Credit ◽  
Credit Default

scholarly journals Sovereign credit default swap spreads as tools of ensuring the international financial security of the Eurozone countries

2018 ◽  
Keyword(s):  
Credit Risk ◽  
Credit Rating ◽  
Credit Default Swap ◽  
Credit Default Swaps ◽  
Financial Security ◽  
Rating Agencies ◽  
Sovereign Credit ◽  
Credit Default ◽  
World Economic ◽  
Default Swap

The article investigates the state of the Eurozone countries’ financial security in the context of the world economic environment globalization. For the purpose of this, financial security is considered in terms of institutional, instrumental, and interdisciplinary dimensions. The subject of research is the tools of the Eurozone countries’ financial security ensuring. The goal is to research the dependence of the financial activity of the euro area countries on the results of credit rating assessments by rating agencies using the credit default swap instrument in the context of the Eurozone countries’ financial security ensuring.The objective is the process of the Eurozone countries’ financial security ensuring in the context of the world economic environment globalization. General scientific methods are used, such as system analysis – to determine the peculiarities of the financial security ensuring,regression analysis - to determine the relationship between the spreads of sovereign credit default swaps and the eurozone credit rating class. The following results are obtained: on the basis of the regression analysis of the spreads of sovereign credit default swaps and the eurozone credit rating classindicators the influence of sovereign credit risk figure on investment attractiveness of the Eurozone countries is determined; the approaches of the credit default swaps usage in the context of the researching of the credit rating impact on the investment attractiveness of the sovereigns are systematized; examination of dependence between credit ratings and sovereign credit default swap spreads is applied as the main research tool. Conclusions: for the sake of the Eurozone countries’ financial security enhancement, the authors offer replacement of the credit ratings of leading credit rating agencies with alternative credit risk indicators : market assessments of credit risk, instruments for internal credit risk assessment and third party valuation, as well as the ways of strengthening the Eurozone’s financial security through the establishment of permanent threat monitoring system and estimation of their quantity and quality variables are suggested in the article.

scholarly journals Market frictions and the pricing of sovereign credit default swaps

2016 ◽  
Vol 60 ◽  
pp. 223-252 ◽  
Author(s):  
Antonio Rubia ◽  
Lidia Sanchis-Marco ◽  
Pedro Serrano
Keyword(s):  
Credit Default Swaps ◽  
Market Frictions ◽  
Sovereign Credit ◽  
Credit Default

Credit Default Swaps and Bank Regulatory Capital*

2020 ◽  
Author(s):  
Chenyu Shan ◽  
Dragon Yongjun Tang ◽  
Hong Yan ◽  
Xing (Alex) Zhou
Keyword(s):  
Credit Risk ◽  
Credit Default Swaps ◽  
Unintended Consequences ◽  
Government Support ◽  
Regulatory Capital ◽  
Credit Default ◽  
Capital Ratios

Abstract While credit default swaps (CDSs) can be used to hedge credit risk exposures or to speculate, we examine another use of them: banks buy CDS referencing their borrowers to obtain regulatory capital relief. Such capital relief activities have unintended consequences, as banks extend riskier loans when they buy CDS to boost capital ratios. While capital-induced CDS-user banks achieve higher profitability during normal times, they perform worse and request more government support in crisis periods than other banks that use CDS for trading or speculation. Our findings suggest that banks’ CDS trading for capital relief purposes may make these banks riskier.

Laying off credit risk: Loan sales versus credit default swaps

2013 ◽  
Vol 107 (1) ◽  
pp. 25-45 ◽  
Author(s):  
Christine A. Parlour ◽  
Andrew Winton
Keyword(s):  
Credit Risk ◽  
Credit Default Swaps ◽  
Loan Sales ◽  
Credit Default

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.

scholarly journals Does the Tail Wag the Dog? The Effect of Credit Default Swaps on Credit Risk

2012 ◽  
Author(s):  
Marti G. Subrahmanyam ◽  
Dragon Yongjun Tang ◽  
Sarah Qian Wang
Keyword(s):  
Credit Risk ◽  
Credit Default Swaps ◽  
Credit Default
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