Abstract

http://ssrn.com/abstract=1407272
 
 

References (9)



 
 

Citations (7)



 


 



Credit Default Swap Auctions


Jean Helwege


University of South Carolina

Samuel Maurer


Federal Reserve Banks - Federal Reserve Bank of New York

Asani Sarkar


Federal Reserve Bank of New York

Yuan Wang


John Molson School of Business, Concordia University

May 1, 2009

Journal of Fixed Income, Vol. 19, No. 2, 2010

Abstract:     
The rapid growth of the credit default swap (CDS) market and the increased number of defaults in recent years have led to major changes in the way CDS contracts are settled when default occurs. Auctions are increasingly the mechanism used to settle these contracts, replacing physical transfers of defaulted bonds between CDS sellers and buyers. Indeed, auctions will become a standard feature of all recent CDS contracts from now on. In this paper, we examine all of the CDS auctions conducted to date and evaluate their efficacy by comparing the auction outcomes to prices of the underlying bonds in the secondary market. The auctions appear to have served their purpose, as we find no evidence of inefficiency in the process: Participation is high, open interest is low, and the auction prices are close to the prices observed in the bond market before and after each auction has occurred. We qualify our conclusions by noting that relatively few auctions have taken place thus far.

Number of Pages in PDF File: 25

Keywords: credit default swaps, settlement, auctions, recovery basis, corporate bonds, default

JEL Classification: G10, G13, G33

Accepted Paper Series





Download This Paper

Date posted: May 21, 2009 ; Last revised: November 18, 2013

Suggested Citation

Helwege, Jean and Maurer, Samuel and Sarkar, Asani and Wang, Yuan, Credit Default Swap Auctions (May 1, 2009). Journal of Fixed Income, Vol. 19, No. 2, 2010. Available at SSRN: http://ssrn.com/abstract=1407272 or http://dx.doi.org/10.2139/ssrn.1407272

Contact Information

Jean Helwege
University of South Carolina ( email )
Columbia, SC 29208
United States
Samuel Maurer
Federal Reserve Banks - Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
Asani Sarkar (Contact Author)
Federal Reserve Bank of New York ( email )
Research Department
33 Liberty Street
New York, NY 10045
United States
212-720-8943 (Phone)
212-720-1582 (Fax)
HOME PAGE: http://www.newyorkfed.org/research/economists/sarkar/pub.html
Yuan Wang
John Molson School of Business, Concordia University ( email )
Montreal
Canada
Feedback to SSRN


Paper statistics
Abstract Views: 1,961
Downloads: 415
Download Rank: 40,073
References:  9
Citations:  7

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.391 seconds