Do Credit Default Swaps Mitigate the Impact of Credit Rating Downgrades?*
نویسندگان
چکیده
منابع مشابه
Credit Risk and IFRS : The Case of Credit Default Swaps
Theory predicts that the accounting information transparency affects credit spreads. Given that one of the putative benefits of International Financial Reporting Standards (IFRS) is transparency of accounting information, this study evaluates the impact of IFRS on the pricing of credit spreads in the over-the-counter Credit Default Swap (CDS) market. Using a difference in differences methodolog...
متن کاملThe Real Effects of Credit Default Swaps
We examine the effect of introducing credit default swaps (CDSs) on firms’ investment and financing policies. Our model allows for dynamic investment and dynamic financing using equity and debt, and debt holders can trade in the CDS market. After calibrating the model, we compare an economy with a CDS market to an economy without one. The model contains both positive and negative effects of CDS...
متن کاملValuation of credit default swaps and swaptions
This paper presents a conceptual framework for valuation of single-name credit derivatives, and recuperates, in some cases generalizing, a few of known results in credit risk theory. Valuation is viewed with respect to a given state price density and relative to a general numeraire. Default probabilities and recoveries are considered as processes adapted to a subfiltration, following Jeanblanc ...
متن کاملCredit Default Swaps and the Canadian Context
significant aspect of the evolution of credit markets has been the development of credit-risk transfer through the use of derivatives.1 Globally, one of the fastest-growing derivative products is the credit default swap (CDS). This article describes the basic mechanics of a CDS, assesses the impact of CDSs on market efficiency, and considers the implications of the growing market for CDSs for f...
متن کاملLaying off Credit Risk: Loan Sales versus Credit Default Swaps∗
After making a loan, a bank finds out if the loan needs contract enforcement (“monitoring”); it also decides whether to lay off credit risk in order to release costly capital. A bank can lay off credit risk by either selling the loan or by buying insurance through a credit default swap (CDS). With a CDS, the originating bank retains the loan’s control rights but no longer has an incentive to mo...
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ژورنال
عنوان ژورنال: Review of Finance
سال: 2018
ISSN: 1572-3097,1573-692X
DOI: 10.1093/rof/rfy033