Strategic Conduct in Credit Derivative Markets

23 Pages Posted: 30 Jan 2013 Last revised: 10 Dec 2015

See all articles by Patrick Bolton

Patrick Bolton

Columbia Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Martin Oehmke

London School of Economics & Political Science (LSE) - Department of Finance

Date Written: March 18, 2013

Abstract

This paper reviews recent research at the intersection of industrial organization and corporate finance on credit default swap (CDS) markets. These markets have been at the center of the financial crisis of 2007-09 and many aspects of their operation are not well understood. The paper covers topics such as counterparty risk in CDS markets, the "empty creditor" problem, "naked" CDS positions, super-senior status of credit (and other) derivatives in Chapter 11 bankruptcy, and strategic behavior in CDS settlement auctions.

Keywords: Credit Default Swaps, Counterparty Risk, Naked CDS, Empty Creditors, CDS Auctions, Derivatives in Bankruptcy

JEL Classification: L00, L13, G00, G01, G33, G22

Suggested Citation

Bolton, Patrick and Oehmke, Martin, Strategic Conduct in Credit Derivative Markets (March 18, 2013). International Journal of Industrial Organization (2013), 31(5): 652-658. Available at SSRN: https://ssrn.com/abstract=2207949

Patrick Bolton

Columbia Business School - Department of Economics ( email )

420 West 118th Street
New York, NY 10027
United States

HOME PAGE: http://www0.gsb.columbia.edu/faculty/pbolton/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Martin Oehmke (Contact Author)

London School of Economics & Political Science (LSE) - Department of Finance ( email )

United Kingdom

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