Publication type: Article in scientific journal
Type of review: Peer review (publication)
Title: CDS spreads in the aftermath of central clearing
Authors: Kaya, Orcun
et. al: No
DOI: 10.1504/IJFMD.2017.087958
Published in: International Journal of Financial Markets and Derivatives
Volume(Issue): 6
Issue: 2
Page(s): 75
Pages to: 101
Issue Date: 2017
Publisher / Ed. Institution: Inderscience
ISSN: 1756-7130
Language: English
Subjects: Central clearing; Cost of trading; Counterparty risk; Credit default swap; CDS
Subject (DDC): 332: Financial economics
Abstract: In an attempt to understand the impact of derivative market reforms, this paper focuses on the spreads of centrally cleared CDSs using a unique data set of voluntarily cleared non-financial single-name contracts over the period from January 2009 to June 2013. Controlling for a number of factors that previous studies identified as important determinants of credit risk, my results indicate that CDS spreads widen with the initiation of central clearing. I document that even though dealer risk is priced in CDS spreads and an increase in dealer risk narrows spreads, the initiation of central clearing does not necessarily change the pricing of counterparty risk for CDSs written on non-financial firms. On the contrary, I provide evidence that CDS volatility and central clearing widen CDS spreads jointly. Because the margin requirements of CCPs depend heavily on CDS spread variations observed in the past, observed widening in spreads is potentially caused by the collateral costs related to central clearing.
Fulltext version: Published version
License (according to publishing contract): Licence according to publishing contract
Departement: School of Management and Law
Appears in collections:Publikationen School of Management and Law

Files in This Item:
There are no files associated with this item.

Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.