Working Paper: CEPR ID: DP13535
Authors: Nina Boyarchenko; Anna Costello; Or Shachar
Abstract: The 2007-2009 financial crisis highlighted the vulnerability of financial institutions linked by a complex web of credit default swap (CDS) contracts, sparking a wave of regulatory changes to the structure of the market. In this paper, we provide broad evidence on the evolution of the CDS market in the post-crisis period, document the properties of participants’ exposures to corporate CDS over time, and study the differential pricing of transactions between different types of counterparties.
Keywords: cds positions; cds transactions; dealer market power
JEL Codes: G10; G12; G19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| designated dealers exert price-setting power (D49) | transaction pricing (D49) |
| introduction of central clearing (Y20) | transaction costs (D23) |
| clearing eligibility reduces costs (D61) | buy-side customers (L81) |
| decline in gross notional amounts of single-name CDS contracts (G33) | contracts not eligible for central clearing (D86) |