CDS Zombies

European Business Organization Law Review 13, Forthcoming

37 Pages Posted: 3 Sep 2012 Last revised: 25 Dec 2014

See all articles by Anna Gelpern

Anna Gelpern

Georgetown University Law Center

G. Mitu Gulati

Duke University School of Law

Date Written: August 29, 2012


This paper examines the contract interpretation strategies adopted by the International Swaps and Derivatives Association (ISDA) for its credit derivatives contracts in the Greek sovereign debt crisis. We argue that the economic function of sovereign credit default swaps (CDS) after Greece is limited and uncertain, partly thanks to ISDA’s insistence on textualist interpretation. Contract theory explanations for textualist preferences emphasise either transactional efficiency or relational factors, which do not fit ISDA or the derivatives market. We pose an alternative explanation: the embrace of textualism in this case may be a means for ISDA to reconcile the competing political demands from state regulators and its market constituents. We describe categories of contracts susceptible to such political demands, and consider when and why textualism might be the preferred response.

Keywords: CDS, derivatives, sovereign debt, Greece, Europe, financial crisis, ISDA

JEL Classification: F34, F36, G15, G28, G38, K12, K23

Suggested Citation

Gelpern, Anna and Gulati, Gaurang Mitu, CDS Zombies (August 29, 2012). European Business Organization Law Review 13, Forthcoming, Available at SSRN:

Anna Gelpern (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

Gaurang Mitu Gulati

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

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