We analyse the links between credit default swaps (CDSs) and bonds and try to determine which is the leader in the price discovery process. As the respective sizes of the markets are quite different for sovereigns and corporates, we consider a sample including both categories. For each entity,...

Fluctuations in investor risk aversion are often cited as a factor explaining crises on financial markets. The alternation between periods of bullishness prompting investors to make risky investments, and periods of bearishness, when they retreat to the safest forms of investments, could be at...

Prospects for a restructuring of Greek debt gave rise to: 1/ strong fears of an amplification of systemic risk associated with doubts as to whether the European financial system would be able to cope with a sovereign default; 2/ discussions about whether the credit default swaps (CDSs) would be...

Has the General Motors (GM) and Ford crisis in 2005 spread to the whole credit default swap (CDS) market? To answer this question, we study the correlations between CDS premia, by using a sample of 226 CDSs on major US and European firms. We show that correlations significantly increased during...

[eng] The Settlement of Lehman Brothers Bankruptcy on the Credit Default Swap Market . Lehman Brothers bankruptcy created important risks for the credit default swap (CDS) market. Firstly, Lehman Brothers was a key participant of the CDS market, as buyer and seller of a large number of...

We study the General Motors (GM) and Ford crisis in 2005 in order to determine if the credit default swap (CDS) market is subject to contagion effects. Has the crisis spread to the whole (CDS) market? To answer this question, we study the correlations between CDS premia, by using a sample of 226...

There are several types of risk aversion indicators used by financial institutions. These indicators, which are estimated in diverse ways, often show differing developments, although it is not possible to directly assess which is the most appropriate. Here, we consider the most well-known of...

We analyse the links between credit default swap (CDS) and bond spreads and try to determine which one is the leading market in the price discovery process. To do that, we construct a sample of CDS premia and bonds spreads on a generic 5-year bond, for 17 financials and 18 sovereigns. First, we...

The huge positions on the credit default swaps (CDS) have raised concerns about the ability of the market to settle major entities’ defaults. The near-failure of AIG and the bankruptcy of Lehman Brothers in 2008 have revealed the exposure of CDS’s buyers to counterparty risk and hence...