The Impact Of Central Clearing On The Market For Single-Name Credit Default Swaps
NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE(2021)
摘要
In this article, we revisit the impact of the voluntary central clearing scheme on the CDS market. In order to address the endogeneity problem, we use a robust methodology that relies on dynamic propensity-score matching combined with generalized difference-in-differences. Our empirical findings show that central clearing results in a small increase in CDS spreads (ranging from 14 to 19 bps), while there is no evidence of an associated improvement in CDS market liquidity and trading activity or of a deterioration in the default risk of the underlying bond. These results suggest that the increase in CDS spreads can be mainly attributed to a reduction in CDS counterparty risk.
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关键词
Credit default swaps, Central clearing, Counterparty risk, Liquidity, Trading activity, Bond default spread, Difference-in-differences, Parallel trend
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