Credit Default Swaps: Mechanics and Empirical Evidence on Benefits, Costs, and Inter-Market Relations

ISBN-13: 9783030065805 / Angielski / Miękka / 2019 / 331 str.

Christopher L. Culp; Andria Van Der Merwe; Bettina J. Starkle

Spis treści

Part I: The CDS Market and Product Mechanics

Chapter 1: Overview of CDS Products and Market Activity

A......... Primary CDS Product Types

1......... Single-Name CDSs

2......... Multi-Name CDSs

3......... Asset-Backed CDSs

B......... Aggregate Market Activity

1......... CDS Notional Amounts Outstanding

2......... CDS Trading Activity

References for Chapter 1

End Notes for Chapter 1

 

Chapter 2: Single-Name CDSs

A......... Standard Single-Name CDS Terms and Conventions

1......... Underlying Reference Name

2......... Maturity/Tenor

3......... Coupon/Spread/Premium

4......... Credit Events

5......... Settlement Methods

6......... Deliverable Obligations for Single-Name CDSs with Physical or Auction Settlement

B......... Selected Credit Event Determinations

1......... The Argentine Republic (2001)

2......... The Hellenic Republic (2012)

3......... Noble Group Ltd. (2017)

4......... Blackstone-Hovnanian (2017-2018)

References for Chapter 2

End Notes for Chapter 2

 

Chapter 3: Loan-Only CDSs

A......... The Syndicated Leveraged Loan Market

1......... Syndication and Loan Facilities

2......... The Commoditization of the Leveraged Loan Market

B......... Distinctions between LCDSs and CDSs

1......... Triggering Credit Events

2......... Coupon/Spread

3......... Deliverable Obligations and Settlement Methods

4......... Early Terminations and Bullet LCDSs

References for Chapter 3

End Notes for Chapter 3

 

Chapter 4: Multi-Name and Index CDSs

A......... Portfolio and Basket Multi-Name CDSs

1......... Portfolio CDSs

2......... N^th-to-Default Basket CDSs

3......... Excess-of-Loss Basket CDSs

B......... Index CDSs

1......... Underlying Reference Portfolios

2......... Index Series and Roll Dates

3......... Pricing and Settlement

C......... Tranched Index CDSs

References for Chapter 4

End Notes for Chapter 4

 

Chapter 5: Asset-Backed CDSs

A......... Structured Finance and ABSs

1......... Special Purpose Entities

2......... Types of Securitizations

B......... Typical ABSs

1......... RMBSs and Home Equity Loan-Backed ABSs

2......... CDOs

C......... Asset-Backed CDSs Under the 2003 Definitions

1......... SPE Issuers and Credit Events Under the 2003 Definitions

2......... Complications Arising from ABS Structures

D......... The ISDA PAUG Template

1......... ABCDSs

2......... CDSs on CDO Tranches

References for Chapter 5

End Notes for Chapter 5

 

Chapter 6: CDS Execution and Clearing Mechanisms

A......... CDS Clearing

1......... U.S.

2......... E.U.

3......... Market Activity

B......... CDS Trade Execution

1......... U.S.

2......... E.U.

3......... Market Activity

References for Chapter 6

End Notes for Chapter 6

Part II: Potential Benefits and Costs of CDSs

Chapter 7: Potential Benefits of CDSs

A......... Credit Risk Transfer

1......... Realized Default Risk

2......... Mark-to-Market Risk

B......... Increased Supply of Loanable Funds

C......... Synthetic Bond Investments

D......... Price Discovery and Information Aggregation

References for Chapter 7

End Notes for Chapter 7

 

Chapter 8: Potential Costs of CDSs

A......... Increased Risk-Taking and Diminished Monitoring by Banks

B......... Empty Creditors, Negative Economic Interests, and Strategic Defaults

C......... “Excessive” Volatility Arising from Speculation

D......... Systemic Risk

References for Chapter 8

End Notes for Chapter 8

 

Part III:  Empirical Evidence on the Benefits, Costs, and Inter-Market Relations of CDSs

Chapter 9: The Informational Content of CDS Spreads

A......... Reference Entity Credit Risk

1......... CDS Spreads and the Greek Restructuring Event

2......... CDS Spreads and the Lehman Credit Event

B......... Determinants of CDS Spreads

1......... CDS Spreads and Expected Credit Losses

2......... The Term Structure of CDS Spreads

3......... Determinants of CDS Risk Premiums

C......... Single-Name CDS Event Studies

1......... Credit Rating Actions

2......... Spillover Effects from Adverse Credit Events

3......... Other Corporate Performance Announcements

4......... Other Announcements and Information

References for Chapter 9

End Notes for Chapter 9

 

Chapter 10: Implications of CDS Listings for Reference Entities and Creditors

A......... The Impact of Single-Name CDSs on Bank Lenders

1......... Determinants of Bank Usage of Single-Name CDSs and Implications for Monitoring.

2......... Single-Name CDSs and Risk-Taking by Banks and Insurers

3......... Single-Name CDSs and Loan Syndicates

B......... The Impact of the Availability of Single-Name CDSs on Reference Entities

1......... Impact on the Supply of Credit

2......... Impact on Reference Entity Borrowing Costs

3......... Impacts on Reference Entity Corporate Financing Decisions and Capital Structure

4......... CDS Externalities

5......... The Empty Creditor and Negative Interest Problems

References for Chapter 10

End Notes for Chapter 10

 

Chapter 11: Inter-Market Basis Relations

A......... Price Discovery

1......... CDSs vs. Bonds

2......... CDSs vs. Equities

B......... Impacts of Single-Name CDS Trading on Bond Market Quality

C......... Impacts of Single-Name CDS Trading on Equity Market Quality

D......... The CDS-Bond Basis

1......... Measuring the CDS-Bond Basis

2......... Economic Factors Affecting the Basis

3......... Empirical Examinations of the CDS-Bond Basis

References for Chapter 11

End Notes for Chapter 11

Chapter 12: Inter-Connectedness and Systemic Risk

A......... Credit Default Swap Volatility and Correlation

B......... Measuring Interconnectedness Using CDSs

C......... Sovereign CDSs and Spillover Effects

1......... Evidence from the Eurozone Crisis

2......... Lehman Brothers and the Credit Crisis

3......... Sovereign CDSs and Currency Market Linkages

D......... Interrelated Sovereign and Banking/Corporate Credit Risks

References for Chapter 12

End Notes for Chapter 12

Appendices

Appendix 1: Research Methodology

A......... Sample Universe

B......... Citation Style

C......... Sample Data Underlying Surveyed Articles

End Notes for Appendix 1

Appendix 2: Additional Tables

Index.

O autorze

Christopher L. Culp, Ph.D., is a Research Fellow at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise, an Adjunct Professor at both the Swiss Finance Institute and Universität Bern, a Senior Affiliate with Compass Lexecon, and Managing Director of Financial Economics Consulting, Inc. 

Andria van der Merwe, Ph.D., is a Senior Vice President at Compass Lexecon and a  Research Fellow at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise. 

Bettina Stӓrkle, M.Sc., is an Economist with Compass Lexecon. 

Blurb

This book, unique in its composition, reviews the academic empirical literature on how CDSs actually work in practice, including during distressed times of market crises. It also discusses the mechanics of single-name and index CDSs, the theoretical costs and benefits of CDSs, as well as comprehensively summarizes the empirical evidence on important aspects of these instruments of risk transfer. Full-time academics, researchers at financial institutions, and students will benefit from the dispassionate and comprehensive summary of the academic literature; they can read this book instead of identifying, collecting, and reading the hundreds of academic articles on the important subject of credit risk transfer using derivatives and benefit from the synthesis of the literature provided.