We evaluate the efficacy of the Secondary Market Corporate Credit Facility (SMCCF), a program designed to stabilize the corporate bond market in the wake of the COVID-19 shock. The Fed announced the SMCCF on March 23 and expanded the program on April 9. Regression discontinuity estimates imply...

The capital markets always have been and always will be a vehicle for efficiently distributing risk. Many financial instruments regulated under Federal securities and commodities laws allow their users to fulfill functions that resemble the general mechanism of an insurance contract. However,...

This article discusses the characteristic of collateralized PFE profiles for non-linear products which results in the peak PFE occurring after the margin period of risk. We further discuss the implications of this characteristic on the management of counter party credit risk. The paper analyses...

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...

We show that credit default swap (CDS) trading on a firm's debt positively influences its technological innovation output measured by patents and patent citations. This positive effect is more pronounced in firms relying more on debt financing or being more subject to continuous monitoring by...

We examine the effect of credit default swap (CDS) trading on firm investment, finding a post-CDS introduction decrease in debt issuance and acquisitions, which remains robust to propensity score matching, instrumenting CDS introduction, and controlling for past investment and financing...

We propose a method to extract the risk-neutral distribution of firm-specific stock returns using both options and credit default swaps (CDS). Options and CDS provide information about the central part and the left tail of the distribution, respectively. Together but not in isolation, options...

This paper explores the extent to which term structure of individual CDS spreads can be explained by the firm's rating. Using the Nelson-Siegel model, we construct, for each day, CDS curves from a cross-section of CDS spreads for each rating class. We find that individual CDS deviations from the...

We investigate how market participants price and manage counterparty credit risk in the post-crisis period using confidential trade repository data on single-name credit default swap (CDS) transactions. We find that counterparty risk has a modest impact on the pricing of CDS contracts, but a...