The credit default swap (CDS) market, which became notorious in the wake of the 2007-09 financial crisis, is the third biggest over-the-counter (OTC) derivatives market in the world, with $8 trillion ...notional value outstanding as of June 2018 (BIS 2018). Because of the importance of this market to the world financial system, sweeping regulatory changes-meant to address fragilities uncovered during the crisis-were implemented globally in the years following the crisis. These new regulations changed the market's structure and also, through extensive data collection requirements, allowed greater visibility into the previously opaque bilateral OTC market. In this article, we exploit granular supervisory data to study the properties of exposures taken through the CDS market to corporate reference entities in the United States and Europe, including which institutions use these contracts, what kinds of exposures they take, when they take them, and what factors influence the prices of these exposures. To examine the CDS market, we use supervisory position-level data from the CDS trade repository maintained by the Depository Trust and Clearing Corporation (DTCC). DTCC provides different data subsets depending on the relevant supervisory authority's purview. As a prudential supervisor, the Federal Reserve is entitled to view positions and transactions for which at least one counterparty is an institution it supervises or for which a supervised institution is the reference entity. Each week, the Federal Reserve receives a weekly snapshot showing all outstanding CDS positions that meet these criteria.This data allows us to document properties of both existing and new positions, such as the credit risk profile of the underlying entity, the maturity of the swap, locations of the party and counterparty to the trade, and the type of credit derivative used. Thus, we can present stylized facts on the CDS market's post-crisis evolution across different types of contracts, counterparties, and risk exposures. Unlike previous literature, we study jointly institutions' choices on whether to participate in the four most common CDS products. We show that this holistic view of exposures is necessary for understanding market changes made in response to industry- and regulatory-led innovations.
Celotno besedilo
Dostopno za:
CEKLJ, DOBA, IZUM, KILJ, NUK, PILJ, PNG, SAZU, SIK, UILJ, UKNU, UL, UM, UPUK
40.
Epilogue Gould, Polly
Antarctica, Art and Archive,
2020
Book Chapter
