A practical implementation of a CVA calculation on a portfolio of different types of derivatives with one counterpart can be complicated and needs to be validated in various ways. One very simple possibility is provided by the present paper: When the portfolio is made up only of CCY swaps (which...

Using regulatory data on CDS holdings and corporate bond transactions, I provide evidence for a liquidity spillover effect from CDS to bond markets. Bond trading volumes are 70% larger for investors with CDS positions written on the debt issuer. Moreover, higher CDS trading activity...

The hedge effectiveness of the credit default swap (CDS) indices is analyzed. Starting with the CDS eligible for inclusion in the indices, CDX.NA.IG, CDX.NA.HY, iTraxx Europe and iTraxx Xover, a credit portfolio construction algorithm is proposed. It is based on principal components for variable...

We discuss the historical background of the credit default swap (CDS) market, why CDS auctions were developed, and the most recent literature. We describe the auction rules using the Toys R Us auction as an example. Furthermore, we discuss the theoretical and empirical results presented in...

This study examines the effect of economic and political uncertainty on sovereign CDS spreads using a novel panel index of world uncertainty. We document that sovereign CDS spreads widen with uncertainty. A 1% increase in uncertainty leads to a 0.86% increase in sovereign CDS spreads....

Using both market-wide and firm-level illiquidity measures of the stock, bond, and CDS markets, we find that the co-movements of illiquidity across markets increase significantly during the recent global financial crisis. Moreover, the degree of co-movements remains significantly higher in the...

We study how the credit desk profitability of U.S. dealers that trade corporate bonds and single-name credit default swaps (CDS) affects the level and correlation of liquidity in these two markets. Supervisory datasets allow us to identify the dealers involved in each transaction and to observe...

This paper examines changes in Credit Default Swap (CDS) spreads as a proxy for default risk after M&A announcement for the companies involved. Existing literature extensively documents wealth effects triggered by M&A announcements from the shareholders' perspective, but there is limited...

We evaluate lenders' incentives to mitigate credit default risk through pricing or securitization. Exploiting exogenous variation in credit default risk created by differences in foreclosure law along US state borders, we find that lenders in the mortgage market respond to the law in...

We find that firms' market share grows significantly faster if they have credit default swaps (CDS) traded on their debt. We use multiple approaches including overlap weighting analysis to draw causal inference about the effect of CDS on market share. CDS-referenced firms achieve growth by...