The Largest Pyramid Scheme of All Time: The Effect of Allowing Unregulated Credit Default Swaps

25 Pages Posted: 26 Apr 2010

See all articles by Austin Murphy

Austin Murphy

Oakland University - School of Business Administration

Date Written: April 12, 2010

Abstract

This research develops an analytical model of the incentives created by allowing credit default swaps to be contracted with virtually no regulation. The incredible growth in the volume of those financial contracts since they were deregulated in 2000, as well as the credit bubble and subsequent financial crisis that developed as a result, becomes clear within that explanatory framework.

Keywords: credit default swap, financial crisis, debt insurance, credit spread

JEL Classification: G1

Suggested Citation

Murphy, J. Austin, The Largest Pyramid Scheme of All Time: The Effect of Allowing Unregulated Credit Default Swaps (April 12, 2010). Available at SSRN: https://ssrn.com/abstract=1588089 or http://dx.doi.org/10.2139/ssrn.1588089

J. Austin Murphy (Contact Author)

Oakland University - School of Business Administration ( email )

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Rochester, MI 48309-4401
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