Quanto CDS spreads are differences in CDS premiums of the same reference entity but in different currency denominations. Such spreads can arise in arbitrage-free models and depend on the risk of a jump in the exchange rate upon default of the underlying and the covariance between the exchange...

We show that cross-border financial linkages are priced in CDS markets. We construct a measure of the foreign exposure risk of a country's banking system based on the composition of its foreign exposures. Our measure helps explain CDS premia of banks. Implicit and explicit guarantees extended to...

Credit Default Swaps can be used to lower capital requirements of dealer banks who enter into uncollateralized derivatives positions with sovereigns. We show in a model that the regulatory incentive to obtain capital relief makes CDS contracts valuable to dealer banks and empirically that,...

The credit default swap (CDS) remains an important class of derivatives contract despite the declining activity in the single-name corporate market. I provide a quick introduction to the contracts, the pricing formula used to interpret the market premiums, the development in trading volumes, and...