Are All Credit Default Swap Databases Equal?
53 Pages Posted: 22 Nov 2010 Last revised: 17 Jan 2013
Date Written: January 17, 2013
In this study we compare the five major sources of corporate Credit Default Swap prices: GFI, Fenics, Reuters, CMA, and Markit, using the most liquid single name 5-year CDS of the components of the leading market indexes, iTraxx and CDX for the period from 2004 to 2010. We find systematic differences between the data sets implying that deviations from the common trend among prices in the different databases are not purely random but are explained by idiosyncratic factors as well as financial institutions financing costs, global risk, and other trading factors. The lower is the amount of transaction prices available the higher is the deviation among databases. The CMA database quotes lead the price discovery process in comparison with the quotes provided by other databases. Moreover, we find that there is not a full consistency among databases in the results of price discovery (causality) analysis between stock and CDS returns.
Keywords: Credit Default Swap Prices, Databases, Liquidity
JEL Classification: F33, G12, H63
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