Using a comprehensive dataset from German banks, we document the usage of sovereign credit default swaps (CDS) during the European sovereign debt crisis of 2008-2013. Banks used the sovereign CDS market to extend, rather than hedge, their long exposures to sovereign risk during this period....

The substantial economic transformation required to mitigate and adapt to climate change will lower the value of certain businesses as well as some firms' assets in the not-too-distant future. Firms will need to transition to a less carbon-intensive business model, but may do so at different...

We explore the time-varying conditional correlations of the Sovereing CDS spread returns for Germany, France, China and Japan against USA. We employ a cDCC-AR-FIGARCH model in order to capture potential contagion effects between the markets during the 2011-2018 post global financial crisis....

This paper seeks to investigate the time-varying conditional correlations to the crude oil futures contract returns and the private Credit Default Swap market returns of Germany and France. We employ a dynamic conditional correlation (DCC) Generalized Auto Regressive Conditional...

During the 2010-2012 sovereign debt crisis in Europe, policy makers responded to the controversy surrounding CDS by implementing a series of policies that banned naked CDS trading. These policies serve as quasi-natural experiments that allow us to empirically identify the effect of naked CDS...

This paper questions the relevance of using only the 5-year maturity CDS spreads to examine the CDS market response to the disclosure of a regulatory stress test results. Since the stress testing exercises are performed on short-term forward-looking stressed scenarios (1 to 3 years), we assume...

Firm cyclicality decreases by around 40% after the inception of credit default swap (CDS) trading. The effect is due to CDS firms’ lower asset growth-GDP growth sensitivity in good times and stronger for firms facing a more severe exacting creditor problem. The cyclicality-reducing effect of...

This paper is a first attempt to include credit derivatives in international macro-financial analysis. We document that gross credit derivatives holdings map to bilateral portfolio investment linkages. On a net basis, our results suggest an asymmetry between sectors and between net buyers and...

We study how macroeconomic uncertainty (EU) manifests into the cross-sectional variations of the credit default swap (CDS)-bond bases. We develop a structural model in which common EU induces informational friction affecting the pricing in the bond and CDS markets. Higher EU will lead to a...

We study the performance of collateralized loan obligations (CLOs) to understand the market imperfections giving rise to these vehicles and the corresponding costs. CLO equity tranches earn positive abnormal returns from the risk-adjusted price differential between leveraged loans and CLO debt...